Best Credit Card Consolidation Loans
A credit card consolidation loan can help you organise your finances and save money if you’re having trouble keeping up with several credit card payments each month. This type of loan can help you pay off your existing credit card debt in one low-interest monthly payment.
We reviewed 15 popular lenders based on 11 data points in the categories of Loan Details, Loan Cost, Eligibility and Accessibility, Customer Experience, and Application Process. We selected the best lenders based on the weight assigned to each category:
- credit costs: 35%
- loan details: 20%
- Eligibility and Accessibility: 20%
- Direct payment to creditors: 15%
- customer experience: ten%
Within each category, we also considered several characteristics, including loan amounts available, repayment terms, APR ranges, and applicable fees. We’ve also looked at minimum credit requirements, whether each lender accepts co-signers or joint applications, and geographic availability.
Tips on how to compare the best credit card consolidation loans
Before you commit to a consolidation loan, compare lenders to find loan amounts, terms, and Annual Percentage Rates (APRs) that meet your needs. Before choosing a lender, follow these tips:
- Prequalify if the option is available. Pre-qualification lets you see the rates you’re likely to qualify for with just a gentle credit check that doesn’t affect your credit score. This can save you time and effort when applying for credit and reduce the number of difficult inquiries about your credit report.
- Make sure the lender allows debt consolidation. The best personal loans are extremely flexible, but some lenders prohibit certain uses. In addition to choosing a lender that offers credit card consolidation, streamline the process by choosing a lender that offers direct repayment to creditors.
- Select a loan to pay off all of your credit card debt. Lenders typically offer personal loans ranging from $1,000 to $100,000. Choose an option that covers all of your credit card debt without borrowing more than you need.
- Evaluate the total costs and fees. Compare the interest rates available from each lender and additional costs such as lending fees. Many online lenders now offer a no-fee structure that can lower the overall cost of borrowing.
- Find customer support resources and reviews. Credit card consolidation is often aimed at simplifying payments and streamlining your finances. Therefore, a highly qualified customer support team is particularly important in debt consolidation. Check out each lender’s support options and read customer reviews to find significant gaps.
What is credit card consolidation?
Consolidating credit card debt is obtaining a personal loan and utilising the money to settle various credit card debts. This effectively consolidates a consumer’s high-interest credit card debt into one monthly loan payment. Credit card consolidation loans can simplify a borrower’s financial situation while also providing cheaper interest rates and fewer monthly payments.
How does credit card consolidation work?
When you consolidate your credit card debt with a personal loan, you are essentially taking out a new loan to pay off your debt. The procedure is submitting an application for a new personal loan, followed by using the funds to settle any outstanding credit card debt. By transferring the loan funds straight to the creditors, the lender will occasionally further streamline the consolidation process.
When Should You Consider Credit Card Consolidation?
Credit card consolidation loans can help borrowers save money and manage their monthly payments more easily. However, this strategy is not suitable for all borrowers. Consider credit card consolidation if you:
- Always have enough cash to cover payments. Debt consolidation is only effective if you have enough cash to make the new monthly payment. Credit card consolidation probably won’t improve your financial situation if you’re already struggling to make ends meet each month.
- Have high-interest debts. If you have a balance on your credit card Every month you’re probably paying high rates, sometimes 27% or more. Personal loan interest rates generally range from 3% to 36%. Therefore, you could be able to pay off your debt more quickly and for less money if you’re approved for a consolidation loan with a reduced interest rate.
- Have good credit. You need a solid credit history to qualify for the best interest rates and consolidation loan terms. Borrowers with a score of at least 720 have the longest time to qualify for a competitive loan. Those with bad or fair credit may still qualify, but will likely pay higher interest rates.
- Do you have debts that will take at least six months to pay off? If you have little debt, you may be able to pay it off without taking out a consolidation loan. In general, consolidation loans are best for those who have at least $5,000 in debt that will take at least six months to repay.
- Have a plan to avoid future debt. Although consolidation saves you money each month, it doesn’t help you when you start piling on new debt. If you consolidate your credit card debt without changing your spending habits, you’ll likely find yourself in the same situation years later. Avoid this by setting a budget and committing to only spending what you can afford.
How to get a credit card consolidation loan
The process of obtaining a credit card consolidation loan varies by lender. Nevertheless, there are a few general steps to consider when applying:
- Check your credit score. Before you buy a consolidation loan, Check your credit score to understand which lenders you can qualify with and what interest rates you can expect. Doing this early gives you time to improve your score before submitting an application.
- Prequalified. Some lenders allow you to pre-qualify for a loan without affecting your credit score. Here’s an overview of the interest rates and tenors you may qualify for before you officially apply.
- Compare lenders. Once you know which lenders you are eligible with, compare their offers to find the best deal based on interest rates, fees, and repayment terms. Depending on your goals, the best option might be the lender with the lowest monthly payment, the most competitive interest rates, or the most convenient repayment process.
- Gather the necessary documents. In most cases, you will be required to provide documentation proving your employment, income, and bank account information. Having this information at hand can help expedite approval and funding.