The difference between a debt consolidation loan and a credit card consolidation loan is simply how you use the loan. A consolidation loan is just a large personal loan that is used to pay off other debts. If you use it for credit card debt then you could refer to it as a credit card consolidation loan. If used for another type of debt like payday loans or title loans, then you could simply call it a debt consolidation loan.
Consolidation is a fairly straightforward process. A borrower takes out one large personal loan and then uses that money to pay off several other smaller debts. The debt could be from credit cards, payday loans, pawn shop loans, title loans, or any other type of financial product. The idea is that by combining all of these debts into one, your monthly finances will be much easier to handle. After all, it’s easier to make one monthly payment than several.
The other main benefit to a consolidation loan, whether it’s for credit cards or another type of debt, is that you may be able to get a lower interest rate. This will largely depend on what kind of loan you use for consolidation. The best loans to opt for would be traditional bank loans and credit union loans. These tend to carry the lowest interest rates when it comes to personal loans. If you have a less-than-perfect credit score and can’t get approved for one of these you may still have options, like a personal installment loan.
No matter what type of loan you choose for consolidation, there are a few things to keep in mind. First, it’s always best to consolidate your debts if you can get a better overall interest rate on the new loan. Second, your credit score may fluctuate from taking out a new, larger loan. But if you consistently make your payments on time and repay the loan as promised your credit score should improve in the long run. And lastly, consolidating your debts may make your finances easier to handle, but you should always maintain a monthly budget and be sure to make your payments on time.