Credit cards
Credit Cards

If you’re paying credit card debt across multiple cards, it might be a smart idea to consolidate your credit card debt. Consolidating credit card debt requires getting a loan that pays off your credit card debt, and you then pay off the loan instead. Your duty is to find a loan that either offers lower monthly payments than your credit card bill, or (and this is the much better choice!) a loan with a lower interest rate or APR than what you are paying right now.

This means searching around for the best possible consolidation rate. Almost Millions can’t offer suggestions, because the market is constantly in flux, but there are a few options to choose from:

Peer-To-Peer Lending

Services such as Lending Club and Prosper offer customers crowdfunded loans for credit card consolidations. Interest rates and fees on the loans vary wildly depending both on your credit score, the state of the market, and the size of your loan.

Credit Unions And Banks

Another good place to find out about credit card consolidation loans is your local credit union or your bank. Both frequently offer loans to repay credit card debt; the interest rates on them may also offer a better rate than what you’re paying for your credit card debt right now.

There are two types of loans you’re likely to encounter: Secured and unsecured loans.

Secured loans require you depositing cash in a savings account, and then receiving a loan equal to the amount you deposit. Once the loan is paid back, you have access to all the money you deposited in a savings account. Interest rates are generally lower on secured loans… but you are depositing money in a bank instead of using it to pay your credit card debt.

Unsecured loans don’t require depositing money in an account, but generally have much higher interest rates.

Credit Cards

Many credit card issuers offer special discounts (such as 0% APR or minimal APR for six months or a year) if you consolidate your debt on their card.

However, there are two catches.

First off, credit card issuers charge a fee (typically 3% or 4%) in exchange for the consolidation. That can be difficult financially.

Secondly, the no/low APR special only lasts for 18 months at all. Afterwards, you’re charged a much higher interest rate.

That means something boring: Reading all the paperwork.

The good part is that it gets you a breather in paying back your credit card debt, and (if you consolidate all your debt on one card) makes things much easier by only needing you to pay one bill a month.

But if you choose this path, remember to pay your credit card bill each month. If not, the debt and penalty fees rack up real fast.

Other Options

What other ways have you successfully consolidated your credit card debt? Let us know in the comments.