Is It Worth It To Consolidate Credit Card Debt

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If you’re not sure how best to deal with your credit card debt, our guide to debt consolidation vs. Debt consolidation credit card refinancing can help. (iStock)

Is It Worth It To Consolidate Credit Card Debt

If your credit card balance is unmanageable, paying off debt with a personal loan may be an option.

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Sometimes, this is referred to as debt consolidation. Others may call it credit card refinancing. In both cases, this means rolling your card balance into a personal loan, which you’ll then pay off each month over time.

Here’s what you need to know about debt consolidation versus debt consolidation credit card refinancing. If you’re considering consolidating credit card debt into a low-interest personal loan, Credible makes it easy to compare personal loan interest rates from multiple lenders.

Credit card refinancing is when you use another financial product—often a personal loan—to pay off your credit card balance. You then make monthly payments on the loan until the loan is paid in full.

This process allows you to get lower interest rates (credit cards have very high interest rates compared to most personal loans), and also makes payments easier, so you only make one payment a month instead of several.

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Credit card refinancing is usually best for borrowers who have good credit and qualify for a personal loan with a lower interest rate than their credit card.

Banks, credit unions and online lenders usually offer personal loans that you can use to refinance your credit card debt. This requires a credit check and various forms of financial documentation.

The lender you choose will depend on many factors, including your credit score and how quickly you need loan financing. For example, some online lenders can fund a loan as soon as the next business day after the loan is approved.

It is a good idea to compare personal loan interest rates from several lenders before deciding on a credit card refinance loan. Reliable makes it easy to see your pre-qualified rates in minutes.

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In both scenarios, you use a personal loan or other type of loan product to pay off credit card and other debt you may have. This essentially replaces your debt with a single loan, which you can then pay off over time.

Refinancing your credit card and using a balance transfer card have the same general principles, but they can produce very different results. With refinancing, you get one payment with a fixed interest rate for the long term. This makes it easier to repay many of your debts, and often results in lower interest costs as well.

With a balance transfer card, you use a new credit card to pay off another card (or several). These cards have low introductory rates – often 0% – that expire after 12 to 18 months. At that time, the rate increased significantly.

While a balance transfer card can save you interest if you pay off the balance before the introductory period ends, if you can’t pay off the balance on the new card in that time, it could mean higher interest charges in the long run.

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The right choice depends on your balance, interest rate, credit score and other factors. In general, weight transfer may be a good idea if:

Here’s an example: Let’s say you have $10,000 in credit card debt and your bank offers a balance transfer card with 0% interest for 18 months. Under these conditions, you will need to pay at least $555 each month to pay off the balance before your introductory course ends. If this is not possible, a personal loan may be a better option, as it offers a longer repayment period and lower monthly payments.

You don’t need a perfect credit score for a debt consolidation loan, but the higher your score, the more likely you are to qualify for a personal loan in the amount you need and at a favorable rate. Generally, a score of at least 650 is required to qualify, and a score of 720 can increase your chances of qualifying for the best APR available.

If you are below this threshold, you can try debt consolidation loans for bad credit borrowers or work to improve your score before applying.

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When you’re ready to go ahead with applying for a loan or balance transfer credit card, be sure to shop around. Rates, fees, terms and eligibility vary by provider, so comparing at least a few different lenders and credit card companies can ensure you get the best deal. The average American has an average of 3 credit cards, according to Experian’s 11th Annual Report. Many people have credit cards because plastic sheets are a convenient payment option that allows them to shop easily. With this card, you can buy it now and pay it later in installments. Here are some tips for credit card debt consolidation. Multiple Credit Cards: A Hidden Curse While multiple credit cards help you buy everyday items, credit card convenience can also encourage harmful overspending habits. This unhealthy habit has brought financial disaster to many individuals and families, who have piled up debt and damaged their credit scores. A recent report revealed that the average household credit card debt is $5,315. If you have a lot of credit cards and you want to escape the dark cloud of debt hanging over you, there is a way that promises a happy ending: credit card debt consolidation. What is meant by credit card debt consolidation Debt consolidation means the act of taking out a new loan to pay off other debts. Therefore, credit card debt consolidation is the act of taking out a loan large enough to pay off your entire credit card debt. What benefits can I get by consolidating my credit card debt? you ask This is a sensible financial strategy that will consolidate multiple of your credit card debts with different payments, due dates and interest rates into one payment. This way, you will be able to easily calculate the installments, pay the debts on time and improve your credit score.

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4 Ways to Consolidate Credit Card Debt There are several ways to consolidate credit card debt to lower your monthly payments, and the best way to consolidate them will depend on the amount of debt you have, your credit score and other factors. Here are four ways to consolidate credit card debt and their pros and cons: 1. Refinance with a credit card balance transfer A balance transfer is a type of credit card transaction where you transfer money owed from one credit card to another. which charge a lower interest rate. When choosing a balance transfer credit card, you should consider several factors such as the transfer fee you have to pay, the availability of purchase offers and the credit limit. Pros Consolidate your credit card debt into one manageable payment. Many balance transfer cards come with interest-free periods, ranging from six to 18 months. Allows you to pay off high interest credit cards to low interest cards, allowing you to save money and get out of debt faster. Counter 0% interest offer valid for a limited time. While some cards do not offer fee transfers, most cards charge between 3% and 5% of the transfer amount. Note that refinancing with a balance transfer credit card is only recommended if you have good to excellent credit. This is the only way to qualify for low interest rates and 0% interest offers. 2. Apply for a personal loan A personal loan is a form of loan that you can use to achieve a variety of financial goals, including covering personal expenses, making large purchases and consolidating debt. Personal loans can also be secured, meaning you need collateral to borrow money, or unsecured, meaning you don’t need collateral. Advantage helps you consolidate multiple credit card debts into one low-cost monthly payment. The amount of interest paid is usually lower. Helps you build credit if you pay off the loan promptly. Many personal loans offer flexible loan limits. Cons Personal Loan Inc. Fees and Penalties. Can lead to more debt. A lower interest rate is not guaranteed, especially if you have a bad credit score. When applying for a personal loan, make sure you take into account factors such as interest rates, fees charged, repayment terms, loan limits and collateral requirements.

Should you get a debt consolidation loan to consolidate credit card debt, or is there another way? Here are expert tips to help you decide.

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3. Apply for a home equity loan A home equity loan is a type of loan secured by your home. This means you are borrowing

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