How to Find the Best Credit Card Consolidation Loan

If you’re overwhelmed with managing multiple credit card payments, it may be time to consider a credit card consolidation loan to pay off your debt.

If you’re like millions of Americans with high-interest credit cards and overwhelming outstanding balances, you may want to look into debt relief options to get your debt under control.

Credit card debt consolidation loans can help you pay off your debt sooner and roll multiple high-interest credit cards into one. When comparing your options, look for flexible payment terms and lower, fixed-rate interest annual percentage rates (APRs).

The right loan can simplify your life by combining all your debts into a single monthly payment while allowing you to save thousands of dollars in interest charges.

5 Best Credit Card Consolidation Loans

Signs That You Should Consider a Credit Card Consolidation Loan

A low-interest credit card consolidation may be right for you if:

• You carry high-interest debt. If you can qualify for lower loan rates, you can pay off your debt at a lower cost.
• You have “fair” (680+) to “good” (720+) credit to qualify for a credit card consolidation loan. Higher scores will allow you to get the best rates.
• You have high balances that you won’t be able to pay off in the short term (6-12 months). Generally, a debt consolidation loan is best for those with over $5,000 in credit card debt.
• You have the ability to make payments towards the loan each month.
• You are willing to commit to the payment program, create a budget, and modify your spending habits. This will allow you to avoid debt in the future.

What Is a Credit Card Consolidation Loan?

A credit card consolidation loan will combine multiple credit cards into a fixed monthly payment. This is a good solution when the interest rate on the new loan is lower than the interest rates of your credit cards.

The lower fixed rates will allow you to pay off credit card debt faster as you’ll be able to save more money on interest. 

Americans have an average credit card debt of $6,864. Many have more than one credit card with outstanding balances. A consolidation loan is an effective way to pay off such large balances faster. 

How Does Credit Card Consolidation Work?

A personal loan for credit card consolidation involves getting a new loan that’s large enough to pay off your existing credit card and unsecured personal loan debts. Once you apply for a new loan and demonstrate your creditworthiness, you can use those funds to pay off your outstanding credit card balances. 

In some cases, the lender may send the funds directly to your credit card issuer to simplify the process. Once this is done, you’ll only be left with a single payment each month instead of multiple debt payments. This new loan can help you save money and time. 

Your credit card consolidation loan will typically have a fixed interest rate and a fixed repayment term, which means you will have fixed monthly payments the entire time you’re paying down your loan, so you don’t have to keep track of due dates on multiple credit cards. 

Will a Credit Card Consolidation Loan Impact Your Credit?

Personal loans for credit card consolidation can impact your credit in many ways. When you apply for a personal loan, the financial institution will run a hard credit check. This will temporarily affect your credit score, pushing it down by a few points (3-6 pts) each time a potential lender accesses your credit report(s).

Any impact from debt consolidation on your credit report is temporary, and if you make consistent payments, it will help you rebuild your credit. 

Paying off credit card debt will improve your credit utilization ratio and your credit score–that is, only if you leave your credit card accounts open and with a zero balance once you’ve paid them off.  So, once you pay off your credit card accounts, put away your credit cards (and your credit card information, if the numbers are kept in your phone or your phone’s apps) so you aren’t tempted to use them again right away.  

If necessary, cut your cards up, but keep the accounts open while you pay down your consolidation loan. All else being equal, you will see your FICO scores go up and up!

The lower interest rate and streamlined loan payments will also allow you to manage your payments better and pay off debt faster and more consistently. This translates into lower loan balances overall, which will have a positive impact on your credit.

How To Get a Credit Card Consolidation Loan in 5 Steps

The exact process of getting a credit card consolidation loan will vary by lender, but the general steps are listed below.

1. Prequalify

Many financial institutions will allow you to prequalify for a personal loan without taking a hit on your credit score. This will provide you with a better idea about the terms, minimum loan amount, and APR range you can qualify for before applying. If you have excellent credit, you will typically be able to qualify for lower loan rates.

2. Compare Your Options

Once you have prequalified, compare the loan options to see which one offers the best repayment terms and interest rates for your credit profile. Depending on your preferences, you can select a lender that offers a convenient repayment process, no prepayment penalties, lower rates, or longer loan repayment terms.

3. Send in Your Application

Gather the documents required to send in your loan application. In most cases, you will need to submit qualifying documents that prove your income and employment records, as well as your bank account information.

If you are applying with a co-borrower or cosigner, you’ll also need to submit their documents. Many lenders also offer an online application process option.

4. Wait for the Approval

Most financial institutions and credit unions offer loan approvals within one business day after making a credit inquiry, with funding on the next business day. In some cases, the approval may take longer, and you may be asked to submit additional documents if necessary.

5. Pay off Your Credit Cards

Once you receive the loan funds, use them to pay off the outstanding balances on your credit cards as soon as possible. Some lenders may transfer the funds directly to the credit card issuer on your behalf, which is an added benefit for your loan purpose. 

Set up autopay and continue to make payments towards your new loan. Once you have paid your cards off, be sure not to use them again to avoid any additional debt accumulation. A good idea is to cut up these old cards or lock them away until you are fully confident in your relationship with spending and money management.

Tips To Find the Best Credit Card Consolidation Loans

When comparing your loan offers, compare these factors to find the best credit card consolidation loans:

APR

The annual percentage rate (APR) of the loan includes not only the interest rates but also all the fees and charges you’ll pay throughout the life of your consolidation loan, so it gives you the true annualized cost of borrowing money with that particular loan. The rates you qualify for will depend on your debt-to-income rate, income, credit score, and other factors. All else equal, it is best to choose a loan with the lowest APR.

Origination Fees

Many lenders will charge loan origination fees to cover the costs involved with processing your loan application and distributing the loan proceeds to you. This is a one-time fee that will be added to your loan balance or deducted from the loan proceeds. Choose an option that has no origination fees or one that has the lowest fees to keep your costs down.

Features

Many lenders offer additional perks such as hardship programs for borrowers, credit score monitoring, flexible loan terms, and direct payment to credit card companies. Choose a loan that comes with features that matter to you the most. 

4 Other Options to Tackle Credit Card Debt

There is more than one way to tackle credit card debt. Consider the alternatives listed here if credit card consolidation loans are not right for you. 

1. Debt Payoff Strategies

If you don’t have a lot of debt, use a debt repayment strategy like debt avalanche or debt snowball. 

With the debt avalanche method, you start by paying off the credit card with the highest interest rate first, regardless of the size of the balance on that card. Once you pay that off, you can focus on the credit card with the second-highest interest rate. This strategy allows you to save more on interest charges as you focus your efforts on where it matters the most. 

The debt snowball method allows you to bank on momentum and motivation as you start by paying off your smallest credit card balance first, regardless of the interest rate(s) on your other card(s), before moving on to the next one. With this strategy, you can feel good about paying off each debt faster than with the avalanche method. Don’t underestimate the power of this accomplishment - it will keep you engaged and wanting to move to the next debt and stay focused on becoming debt-free.

Both strategies work and can boost your debt repayment efforts.

2. 0% Balance Transfer Credit Cards

You can also consolidate your credit cards with a 0% balance transfer credit card. Many credit card companies offer a 0% interest rate for a limited time. 

You can transfer all your balances to the new credit card and pay off the balance during this time period. Balance transfer fees of 3% to 5% will be applicable in most cases. It’s also important to note that if you do not manage to pay off the entire balance within the 0% interest promotional time frame, standard interest rates will be applicable from that point on.

If you have a good credit history, you may be able to qualify for a 0% balance transfer credit card.

3. Debt Management

If refinancing is not an option for you, there are many debt management plans offered by many nonprofit and for-profit credit counseling companies.

You can enroll your unsecured debts, such as credit cards, in the program. Your counselor will negotiate with your lenders to lower interest rates and waive late fees and penalties.

A debt management plan offers you a repayment plan that will be easier to stick to. In many cases, you will be required to close lines of credit when you enroll in the program. 

4. Debt Settlement

If you have over $10K in credit card debt, you may need to focus on serious debt relief measures like debt settlement. 

A reputed debt relief company can negotiate with your lenders on your behalf to settle your account for much less than what you owe. 

Debt settlement is also a good solution for those with bad credit history and those who have accounts in collections, missed payments, and late fees. If you don’t have the means to pay off your entire credit card debt, consider this option. A settlement can help you save up to 50% of your total debt before fees.

Do Your Research Before Applying for a Credit Card Consolidation Loan

Credit card debt can quickly snowball and become a dark shadow in your life. While a consolidation loan is an effective way to lower your interest rate and pay off debts faster, it’s important to do your research so you can get the best possible rates. 

Use the right debt relief program as soon as possible to pay off your debt and start with a clean slate. TurboDebt has helped thousands of clients pay off their debts and take their first steps toward a debt-free life. 

Our knowledgeable debt relief professionals can provide consultations, counseling, and strategic planning services to help you find the right debt solution for your financial situation.

Get in touch with us today for a free consultation. See why thousands of satisfied clients recommend our debt relief services.