credit card consolidation

If you’re feeling overwhelmed with trying to get a handle on debt from multiple lenders, credit card consolidation loans can help.

Consumer household debt in America is still on the rise according to the New York Federal Reserve.  “As of December 31, 2016, total household indebtedness was $12.58 trillion.”  

Consumer debt is often linked to some pretty outrageous interest rates that can be financially devastating.  To help combat the toll of high-interest debts, many lenders offer borrowers a debt consolidation loan. 

While debt consolidation loans do take a hard inquiry on your credit (may temporarily cause credit to dip) the advantages of debt consolidation loans can be worth it in the long run. 

Credit Card Consolidation Loans

  1. Consolidate all your credit card payments into one payment helps monthly accounting go more smoothly. 
  2. If you are behind on payments, a debt consolidation loan will pay off delinquent balances and possibly improve your credit score.
  3.  Interest rates are typically lower for a debt consolidation loan than multiple loan entities.
  4. One credit card payment helps you work toward repayment in a more organized, manageable way. 

Face the Underlying Spending Issues

Some consumers rejoice in the savings credit card consolidation loans give them, but they don’t address the reasons they turned to the multiple credit sources in the first place, sometimes using the savings from consolidating to spend more. This can send consumers into a new cycle of credit card use and misuse. 

Other Loan Options

Homeowners with significant credit card debt will sometimes look at ways they can use their existing home to help them pay off debt either by refinancing their current mortgage, or by taking out a Home Equity Line of Credit. 

Tread carefully with either of these options. Refinancing your mortgage allows you to draw some cash out to pay off credit card balances. If your mortgage market conditions are favorable, you may be able to refinance into a lower interest rate. 

But, before rolling your credit card debt into your home mortgage, it is important to understand some potential risks. explains, “First, there will be closing costs associated with the loan that you will need to pay upfront or add to the balance of the loan. The money you take out also piles onto the mortgage debt.”

Home Equity Line of Credit loans allow you to draw on some of the equity in your home to pay off debt.  There are no limitations or restrictions on how you repurpose this money, so many choose to pay off credit cards with these funds. 

National Debt Relief sounds in on this as well: “Attaching your credit card debt to your home can be a risky proposition. As previously mentioned, doing so takes that debt from unsecured to secured by your home. Additionally, you could be paying that debt over an extended period, as home equity line loan terms can be very lengthy.”

Qualifying for a Credit Card Consolidation Loan

 Lending Studios can connect you with local banks and other finance companies that can evaluate your need for a credit card consolidation loan. If you have a good credit score and have been on time with your payments, lending institutions often can work out a credit card consolidation loan that will meet your needs depending on the amount of credit card debt. 

If your credit card debt is too high, it may be more that the institution’s lending caps.  In that case, they won’t be able to help you. You will have to shop around and see if other lenders have higher lending caps.

Meanwhile, Keep Chipping Away Your Debt

If you don’t qualify for a credit card consolidation loan or even after you have obtained a consolidation loan, it is important to be proactive at paying off your debt as quickly as you can. Here are some tips to consider: 

  • Apply the “debt snowball method.”  Begin with your lowest balance and pay as much as you can towards that debt while continuing to pay the minimum amount on the other balances. Once the lowest balance is paid off, move to the next highest and so forth. 
  • Enlist the help of your credit card company. Credit card statements will feature a couple of repayment methods. One of them refers to a repayment schedule that will get your balance paid off in 3 years. Choose this amount, and bingo, 3 years later that balance will be zero. 
  • Be diligent and obedient to a defined monthly budget–commit to being debt-free to get debt-free.

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