5 Simple Steps for Handling Credit Card Debt Consolidation

credit card debt consolidation

Credit card debt can quickly become overwhelming; it’s too easy to take on more credit card debt than is affordable. For certain borrowers, credit card debt consolidation is a smart strategy to manage debt.

Credit cards carry high interest rates and have repayment schedules that drag debts out and cost borrowers a lot. Deciding to consolidate credit card debt can help pay off credit cards faster and save on interest.

With our simple guide, you’ll learn how to consolidate credit card debt.

Is credit card debt consolidation a smart move?

When you consolidate credit card debt, you take out a new personal loan and use those funds to pay off existing credit card balances.

In some cases, consolidating credit card debts makes them easier and cheaper to repay. But whether that is true for you will depend on a few factors.

Benefits of consolidating credit card debts

First, there are your credit card rates. The higher your credit card rates, the better your chances of saving with a personal loan.

You’ll also want to take a look at your credit history. If you have a higher credit score and favorable credit history, you’ll have a better chance of qualifying for a personal loan and cheaper rates.

Another important benefit of credit card debt consolidation is simplifying your debts. You pay off credit cards and replace them with a single monthly payment.

With fewer account balances and interest rates to keep track of, you’ll be at lower risk of missed payments or racking up fees.

What to watch out for

Credit card debt consolidation won’t be right for everyone. If you have bad credit, the personal loans you’ll qualify for could carry higher rates than what you face on your credit card.

You will also have to be committed to pairing credit card consolidation with responsible spending habits. If you consolidate debts without adjusting your habits and cutting back on spending, your credit card balances will shoot up again and you’ll end up with even more debt.

Consolidate credit card debt in 5 steps

If credit card debt consolidation makes sense for you, next is to start the process. Knowing how to consolidate credit card debt, you’ll be able to compare different loans and terms and choose the best option.

Here are five easy steps to consolidate credit card debts.

1. Catalog all credit card debts

First, you’ll need to know how much you owe on what cards. Log into each of your credit card accounts to see what your current balance is. If you have any outstanding credit card rewards that you can apply to the credit card to lower your balance, do that now. Then record the remaining balance after this credit is applied.

Alternatively, you can request a copy of your free annual credit report. This will list all of your credit card accounts, as well outstanding balances.

2. Figure out how much to borrow

Next, you’ll need to add up the balance for each credit card you wish to pay off. This will be the amount you’ll need to borrow to consolidate your credit cards and pay them off.

Take a look at different personal loan terms. Depending on your situation, you might need a lower monthly payment. Or you could be focused on getting rid of credit card debt as fast as possible.

Use the handy calculator below to determine the loan amount, as well as to play with different loan terms to see which are the best fit for your finances and goals.

Credit Card Consolidation Calculator

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By consolidating your credit cards with a total balance of at a weighted average interest rate of with a new loan at a interest rate, your new monthly payment would be . Your lifetime savings with your new loan would be compared to the total balance you’d pay on your credit cards.

Consolidate and pay off debt with personal loan rates as low as
% APR.

Total balance

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$0

3. Shop for a lender

To find a lender, it’s helpful to know what kind of loan you need and what your credit score is.

With this information in hand, look at what different lenders offer for your credit background and loan needs. Make sure you check unconventional lenders like credit unions or online personal loan providers.

Pay attention to the APRs different lenders offer. You will also want to compare other costs like origination fees. Finding a lender with low personal loan rates and fees will help keep your costs low, too.

4. Apply for a loan

Once you have found a lender that offers a good deal on a personal loan for your credit score, it’s time to apply.

Most lenders have an online or in-person application you can fill out to be pre-approval for a personal loan. You’ll need to provide identifying and financial information on this application, including your Social Security number and income.

The lender will check your credit report and verify your information. If you meet all the requirements, you’ll receive a notice of approval with an outline of the loan terms

5. Pay off credit card debts

After applying and being approved for a personal loan, the next step for credit card debt consolidation is to sign the loan agreement. Make sure you carefully review and understand the agreement and terms of your loan.

Once you agree to the contract and submit it, the lender will ask for your bank account information so they can send the funds from the loan.

How fast you receive your personal loan money will depend on the lender, but many will pay out funds as soon as the next day.

Once the funds appear in your account, it’s time to settle your credit card debts. Send the correct amount for each credit card’s balance, and make sure to secure confirmation of the payment.

Remember, you need to keep up with payments on your new loan for credit card debt consolidation.

Develop better money habits

Once your credit cards have been paid off, resist the temptation to use them. You don’t want to end up in a similar predicament in the future. Put away your credit cards and practice responsible spending.

Not sure where to start? Here are seven tricks that will help you cut back on spending.

Interested in a personal loan?

Here are the top personal loan lenders of 2018!
LenderRates (APR)Loan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Finance Lender Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
  2. Personal Loans: Fixed rates from 5.49% APR to 14.24% APR (with AutoPay). Variable rates from 5.29% APR to 11.44% APR (with AutoPay). SoFi rate ranges are current as of December 1, 2017 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.29% APR assumes current 1-month LIBOR rate of 1.34% plus 4.20% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

2 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate Disclosure: Fixed interest rates range from 5.99% – 16.24% (5.99% – 16.24% APR) based on applicable terms and presence of a co-applicant. Lowest rates shown are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Benefit: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.
7.39% - 29.99%$1,000 - $50,000Visit Upstart
5.29% - 14.24%1$5,000 - $100,000Visit SoFi
8.00% - 25.00%$5,000 - $35,000Visit Payoff
5.99% - 16.24%2$5,000 - $50,000Visit Citizens
5.99% - 35.89%$1,000 - $40,000Visit LendingClub
5.25% - 14.24%$2,000 - $50,000Visit Earnest
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