Debt ConsolidationCredit Card Debt Consolidation
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How to Consolidate Credit Card Debt in 8 Steps

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High credit card balances and expensive interest fees are a combination that can overwhelm any budget. If you currently owe more money on credit cards than you can afford to pay off right away, it might be time to consider consolidating your credit card debt.

When you combine credit card debt with a new line of credit or a loan with a lower interest rate and fewer fees, it can help you save money each month and give your credit score a boost. This guide will help you discover how to consolidate credit card debt in a few simple steps.

8 steps to consolidate your credit card debt

How to consolidate credit card debt
Step What you’ll do
1. Add up your credit card debt List your total balances and APR for each credit card in your name.
2. Check your credit score and credit report Find your credit score and review your credit report from each of the three major credit bureaus.
3. See how much cash you have each month for debt repayment Write down your take-home pay, minus expenses, to figure out how much money you can pay toward debt each month.
4. Decide how you’ll consolidate credit card debt Review five common credit card consolidation options and choose the best fit for you.
5. Shop for lenders and card issuers Compare loan and balance transfer offers from multiple lenders and credit card companies.
6. Apply for a loan or credit card Fill out the loan or credit card application for your favorite credit card consolidation offer.
7. Consolidate your debt Pay off (or verify that your new lender pays off) your existing credit card balances.
8. Repay your new debt Keep all future payments on time and avoid overspending.

1. Add up your credit card debt

The following list can help you gather the important details you need to create a debt payoff plan as you approach credit card debt consolidation:

  • Create a list of each credit card account in your name. A handwritten list or simple spreadsheet will do.
  • Look up the outstanding balance for each account and add it next to each one.
  • Find the APR you’re paying on each credit card.
  • Include details about any offers, such as an introductory APR, that you’re enjoying, along with their expiration dates.
Not sure where to find the above information? Check your credit card statements. You can also give your credit card issuer a call. The customer service number can be found on the back of your card.

2. Check your credit score and credit report

Knowing your credit score is another important step to complete when you’re consolidating credit card debt. Your credit score will directly impact the credit and loan products and terms you qualify for. In general, a good credit score of 670 or higher using the FICO scoring model will allow you to access competitive options.

If you’re not sure where your credit stands, credit card issuers sometimes allow you to see your credit score through their online portal. You can also use credit monitoring services like LendingTree. (Our service can also help you improve your credit and shop loans.)

After consolidating your credit card debt and paying down your balance, you can monitor changes in your credit score. Your credit card debt — not just whether you pay your bill on time — can have a big influence on your score. As your credit utilization ratio goes down, your credit score can increase.

Review and report credit report errors for a credit boost. Credit reporting errors can cause unfair damage to your credit score. Visit to claim a free report from each of the three major credit bureaus once every 12 months (weekly through April 2021). If you find mistakes on your credit report, dispute them.

3. See how much cash you have each month for debt repayment

Before you combine credit card debt into a new loan or credit card, figure out how much extra cash you can apply toward paying down that debt each month. Calculating this number will later help you compare how long you’d be in debt based on the credit and loan offers you find.

To see how much money you have each month for debt payments, follow these steps:

  • Write down your take-home pay after taxes.
  • Subtract your monthly expenses from that figure. Monthly expenses include items like mortgage or rent, utilities and existing loan and credit payments.
  • Deduct variable expenses like food, gas and entertainment. To get a good estimate of this spending, take the average from the previous three or so months.

If you don’t yet have one, creating a budget can help you on your debt payoff journey. A budget can help you understand where your money is going and how you may be able to increase cash flow, as well as identify where you may be struggling financially.

4. Decide how you’ll consolidate credit card debt

The average credit card APR among accounts that assessed interest is 15.78%, according to a September 2020 report from CompareCards. With interest rates this high, paying down credit card balances can be difficult. A new credit card or personal loan to consolidate credit card debt might be a helpful alternative, if you can secure more favorable terms.

Here are various financial products you may use to consolidate your debt:

5 ways to pay off credit card debt
What it is Pros Cons
Balance transfer credit card A credit card that can be used to pay off existing credit card debt.
  • Can offer an introductory low or 0% APR
  • New card may come with rewards for purchases
  • A balance transfer fee may apply
  • Regular APR can be high once introductory offer expires
Personal loan An installment loan from a bank, credit union or online lender you can use to consolidate credit card debt or for other purposes.
  • With good credit, you may qualify for a lower interest rate
  • Lowers your credit utilization ratio by zeroing out credit accounts
  • Extra fees may apply (origination, prepayment, etc.)
  • Interest rates can be high for subpar credit borrowers
Home equity loan Borrow against your home equity to get a secured loan with a potentially lower, fixed interest rate.
  • Interest rate may be lower than a personal loan
  • Potentially longer repayment terms
  • Fail to repay and you might lose your house
  • You need sufficient home equity to qualify
401(k) loan Borrow against your workplace retirement savings plan to pay off credit card debt.
  • Interest rates are generally lower than personal loans
  • Pay interest to yourself
  • Potential tax penalties and fees
  • Must repay quickly in event of job change or loss
  • Not all plan providers permit 401(k) loans
Debt management plan Work with a nonprofit credit counselor who makes payments and negotiates fees with credit card companies on your behalf.
  • Can qualify no matter your credit
  • Might help you avoid bankruptcy
  • May need to close enrolled credit card accounts
  • Typically takes three to five years to complete

Balance transfer credit card

If you’re searching for the best way to consolidate debt, a balance transfer credit card should be at the top of your short list. Many credit card companies have introductory offers to attract new customers, which are typically a low or 0% introductory APR that lasts for 14 to 18 months or longer.

If you can afford to aggressively pay back your debt, a balance transfer could be your most affordable option. If, however, paying down your debt quickly isn’t realistic, a balance transfer could be expensive. You’ll generally have to pay a balance transfer fee (often 3% to 5%) to move your debt in the first place. After the introductory period ends, your APR will also jump and you may be charged interest on the outstanding balance.

Be sure to crunch the numbers and confirm that the savings you’ll receive outweigh any costs. Balance transfers often take five to seven days to process, but in some cases you may have to wait up to three weeks. Take that into account when comparing options.

Shop credit card offers

Personal loan

A personal loan that is used to consolidate debt is commonly known as a debt consolidation loan. Personal loans are an unsecured installment account you can get from a bank, credit union or online lender. This type of loan can come secured or unsecured. A secured loan is backed by collateral, such as your car. If you fail to make payments, the creditor can seize the collateral to make up for lost costs.

Unsecured personal loans may be a great option for consumers with good to excellent credit searching for the best way to consolidate debt, while a secured loan could work better for fair-credit borrowers. Depending on the lender, you might be able to access your funds as soon as the day you’re approved.

If you qualify for a personal loan to consolidate credit card debt, you’ll receive the money you borrow in a lump sum. You’ll apply those funds to your outstanding debts, then repay your new loan at a fixed rate over a fixed period of time. In addition to a fixed interest rate, a personal loan may also feature longer repayment terms, from 12 to 60 months or longer. However, you should watch out for additional fees — such as origination fees or prepayment penalties — and calculate them into your overall debt consolidation costs.

Compare personal loans here

Home equity loan

Homeowners looking at debt consolidation options may like the longer repayment terms and lower fixed interest rates that home equity loans can offer. However, in exchange for these perks, you’ll have to use your house as collateral to secure financing.

It’s critical to understand that you’re putting your home on the line in the hopes of securing more affordable financing. If you can’t afford to repay as promised, you could lose the roof over your head. Additionally, home equity loans can take longer to fund, so they may not be the best fit for borrowers hoping to access cash in a hurry.

See home equity loan offers

401(k) loan

Your 401(k) plan servicer may let you borrow against your retirement savings for a variety of reasons, including debt consolidation. With a 401(k) loan, you may be able to access a portion of your retirement savings now (up to $50,000), then pay yourself back plus interest over a period of up to five years. You can often access funds from a 401(k) loan within a matter of days and without a credit check.

It’s usually best to consider other options before you opt for a 401(k) loan due to the risks involved. For example, if your employer ends your employment or you change jobs, you may have to repay the loan in full quickly. You could also owe the IRS taxes on the money you borrowed, plus a 10% penalty (unless you’re over the age of 59 ½), if you can’t repay as promised.

For bad credit borrowers, however, this can be an affordable way to access credit — just be mindful of the lost retirement savings and costs you may be liable for.

Debt management plan

If you’re struggling to keep up with your credit card payments or you have bad credit, debt consolidation options can be limited. In such situations, a debt management plan might benefit you.

Debt management plans are available through nonprofit credit counseling agencies. When you sign up, you’ll work with a credit counselor who reviews your debt and determines a repayment plan that lasts three to five years. You’ll make payments to the counselor, who will negotiate on your behalf to potentially lower rates and have fees reduced or waived. In turn, the credit counselor will forward the payments you make to your creditors.

Debt management plans can come with a startup fee and monthly fee — though you might qualify for a fee waiver, depending on your situation. You may also be asked to close all credit card accounts enrolled in the program, as well.

5. Shop for lenders and card issuers

Once you’ve chosen how to consolidate credit card debt, it’s time to compare lenders and credit card issuers. (If you plan to work with a credit counseling company, it’s wise to search for the best debt management plan for you, as well.)

As you shop for the best offer, here are a few questions to consider:

  • What APR does the lender or card issuer offer?
  • Are the repayment terms long enough to fit your budget?
  • Will the lender or card issuer charge fees when you refinance credit card debt?
  • Am I likely to qualify based on my credit rating?

Add up the overall costs and compare them to the amount you’ll save by getting out from under a higher interest rate. Crunching the numbers (along with other factors) can help you determine which financing offer could save you the most.

6. Apply for a loan or credit card

When you find your favorite loan or credit card offer, the next step is to apply for financing. Some lenders and credit card companies may let you check to see if you prequalify with a soft credit check, which won’t hurt your credit — though a hard credit inquiry is sure to follow when you’re ready to submit a formal application.

Be prepared to provide information on your loan or credit card application, including:

  • Personal details (such as your name, address, Social Security number and date of birth)
  • Employment status
  • Proof of income (such as bank statements, tax returns or pay stubs)
  • Proof of residence (such as a copy of driver’s license or similar form of government identification)
  • The amount you want to borrow
  • How you’ll use the funds

7. Consolidate your debt

Depending on your credit card consolidation method, the process of paying off your old account balances can vary. Some lenders or credit card issuers will pay your existing credit card companies directly. In other cases, the lender or card issuer may deposit the funds into your account instead and you’ll need to pay your existing credit cards off online or by mailing a check.

8. Repay your new debt

Perhaps the most important part of consolidating credit card debt comes after you combine your balances into a new, single account. It’s critical to make all of your future payments on time if you want to protect (and potentially improve) your credit.

Should you close old credit card accounts after consolidating?

It’s smart to keep your credit cards open whenever possible. Closing credit cards can trigger an increase in your revolving utilization ratio and may lower your credit scores. Plus, if you have rewards cards or cashback cards that you can manage responsibly (repaying your balance in full each month), such accounts can offer you a lot of perks.

However, if you don’t think you’d otherwise be unable to avoid charging new purchases, closing your credit cards might be the right move. Your credit score might suffer when you close the account, but not as much as they could potentially drop if you create an unmanageable debt situation that leads to default and debt in collections.


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