Credit Card Consolidation Loans

Most Americans have at least one credit card they frequently use, and to no surprise. Credit cards can be useful assets, but more than that, their ease of use appeals to virtually everyone.

Major credit cards often come with reward programs and perks and they are incredibly easy to use – just a short tap or swipe and you’re out of the door. Credit cards also allow you to spend more than you have at the given time, which means you can make big purchases whenever you need them.

As reassuring as it sounds to have so much within your reach, spending beyond your means can be quite risky. Such opportunities come with very high-interest rates that you will need to pay later in order to balance out your score. So, what happens when the debt piles up?

Credit cards work like small-scale loans, which means you have to pay them timely and regularly to stay on top of your score. Even if you aren’t indebted, using more than one credit card and having to make multiple monthly payments might be a tiresome routine.

Credit card consolidation loans allow you to combine all your credit card expenses into a single sum and keep track of your situation easier. Read on to learn how to find good arrangements, and see whether you might benefit from a credit card consolidation loan yourself.

How Do Credit Card Consolidation Loans Work?

There are different options with this goal in mind, but the basic idea behind all of them is pretty straightforward.

Instead of having to keep track of multiple cards, their interest rates, terms, and any additional fees or debts, you borrow money to pay all your cards off entirely and settle for a single loan instead.

The consolidation loan needs to have lower interest rates than you originally had to make this deal worth doing in the first place.

All consolidation loans have some advantages and drawbacks in their arsenal. Some of them can be riskier than others, but which one will suit you depends on your financial situation.

Types of Credit Card Consolidation Loans

Personal loan

Applying for a personal loan with online lenders, credit unions or banks can be an excellent way to settle your debt.

Personal loans tend to have the most affordable interest rates. There’s a variety of options in terms of whether you want a secured or unsecured loan, how much money you need, how soon you can pay it back, etc.

To consider you for a personal loan, lenders will usually do a soft check to evaluate your current situation. This tells them what sort of behavior they can expect and helps them arrange a mutually beneficial deal.

Another good side of taking a personal loan is that you will likely have several years to pay off the money. A potential drawback is a fee you might have to pay right away when you take the loan.

Working with a nonprofit credit counseling organization

Nonprofit counseling organizations offer you financial advice and help create a plan to get rid of debts. You may ask to apply for a program or plan with the nonprofit, and it usually looks something like this: you pay them a sum of money, and they settle your debts with all the creditors.

Occasionally, a nonprofit may advocate for a lowered interest rate in your favor, or have your monthly payments decreased. However, you may be asked to close the credit cards that you were indebted for, which makes sense but could slightly lower your credit.

Balance transfer credit card

Balance transfer cards usually allow you to transfer the balance onto them without paying any interest rate, though only for a limited time period. This sometimes extends to purchases as well.

If you go for a balance transfer credit card and take advantage of this feature, you may avoid paying for interest completely. However, the downsides of this option include the transfer fee and the credit limit which can’t be exceeded – meaning, some part of your combined debts may not be able to fit onto the

The Bottom Line

Although there is no such thing as a one-size-fits-all solution when it comes to handling debt, credit card consolidation loan can be beneficial if you plan everything correctly.

You can get the most out of this loan by evaluating your financial health, planning out precisely how you’ll pay back the money, and not agreeing with any arrangement that you don’t fully understand.

When making such a substantial decision as applying for a loan, it is best to reach out to a professional and have them explain everything to you.