If you are tired of continuously making multiple credit card payments each month, you might want to consider consolidating your credit card debt. To do that, you will have to borrow money and pay the cards off. In that case, you will no longer need to worry about multiple payments for each of your credit cards – instead you will be left with one uniform loan to pay off.
Ideally, you would then have a single payment with a lower interest rate than the combination of your credit card debts, so you would be paying less in interest while paying the debt down. However, deciding where to borrow the money from for credit card consolidation, and getting approved for the loan is where it can get tricky.
There are quite a few ways to consolidate you credit card debt, and each of them has its pros and cons. Continue reading to find out the best credit card consolidation method for you.
Apply for a personal loan
You can apply for a personal loan for your credit card consolidation in any bank, credit union or even online lender. Your credit will be a key factor when determining if you are eligible for a personal loan for credit card consolidation. The main pro when consolidating your credit card via personal loan is the fact that the interest rate might be lower the rates of your credit cards. Also, you will probably have several years to pay off the personal loan.
However, most lenders charge an origination fee which could get in the way if you are trying to consolidate a large debt. If you have poor credit you might not be eligible for a money-saving interest rate.
Look into non-profit credit card counselling organizations
Credit counselling organizations are non-profits that offer advise and help create plans for paying off debts, including credit card debts. Since these services are mostly free, you have nothing lose. If you choose to pursue this way of credit card consolidation, it would be best to start at National Foundation for Credit Counselling (NFCC).
With the assistance of this organization you will receive a debt management program, which typically includes you making a one-time payment to the credit counselling service, which in turn pays each of your creditors. The organization sometimes is able to negotiate lower interest rates and monthly payments on your behalf.
However, there will most likely be a small fee involved and a requirement to close your credit cards after paying them off which can hurt your credit, so keep that into consideration.
Take out a loan against your vehicle or home
Most banks, credit card unions and even online lenders offer loans with lower interest rates if you choose to have your vehicle or home as collateral. In other words, you will be offered a loan with low interest rate by offering your house or car as compensation in case you are not able to repay the loan or are late to pay it off.
Since this type of loan would be considered a secured loan, its main benefit is a lower interest rate. However the drawback is the fact that you would be taking a secured loan to pay off your unsecured loan for credit card consolidation, so you would be risking your home or vehicle in case things go south. Also, you might need good credit to be eligible for a low interest rate.
Borrow money from friends or family members
Turning to your friends and relatives for money is not something that is desired by anyone – everybody wants to be financially independent from others. However, borrowing from the people closest to you for credit card consolidation does have its benefits. For one, there is no credit check and you will most likely get a loan with lower interest rate. But, consider the fact that you would be putting your personal relationships at risk in case you aren’t able to repay the loan in a timely matter.