Credit Card Consolidation Loans

What is credit card consolidation?

Credit card consolidation is where you find a new form of borrowing and use it to pay off all (or many of) your outstanding credit card debts. For example, if you had $8,000 in credit card debt, you may get an $8,000 personal loan and use it to pay off the credit card debt on your cards.

How does credit card consolidation work?

Credit cards typically have high interest rates compared to other forms of borrowing - around 16-24% is generally a good rate on a credit card. In general, credit cards are best used for monthly spending that is paid off at the end of each month or to cover a short-term emergency that you can pay off within 3-6 months. When you start carrying debt on your credit card for a long time, or for a high amount, the interest rate can make it difficult to get out of debt in a timely manner.

So, instead of struggling against the growing interest to pay off the debt, you can consolidate the debt with another financial product with a better interest rate. This lower rate will allow you to pay off the debt at a lower cost and not struggle against the compounding interest to become debt-free.

Companies that offer credit card consolidation loans

Some of the best companies that offer credit card consolidation loans are:

Avant: borrow $2,000 - $35,000 at 9.95% - 35.99% over 2-5 years (minimum credit score of 550)

Avant

✔ Funding: Borrow $2,000 - $35,000
✔ Minimum Credit Score: 550
✔ APR: 9.95 - 35.95%
✔ Loan term: 2 - 5 years
✔ Funding turnaround: within 24 hours in most cases

With Avant personal loans, borrowers with fair to good credit scores can get access to super fast funding up to $35K. Best for debt consolidation.

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Best Egg: borrow $5,000 - $35,000 at 4.99% - 35.99% over 2-5 years (minimum score of 600)

Best Egg

✔ Funding: Borrow $2,000 - $50,000
✔ Minimum Credit Score: 640
✔ APR: 5.99 - 29.99%
✔ Loan term: 3 - 5 years
✔ Funding turnaround: 1 - 3 business days

With Best Egg personal loans, borrowers with fair to good credit can get funding for 3-5 years and have the option to use the loan for a variety of purposes.

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Discover: borrow $2,500 - $35,000 at 5.99% - 24.99% over 3-7 years (minimum score 660)

Discover

✔ Funding: Borrow $2,500 - $35,000
✔ Minimum Credit Score: 660
✔ APR: 5.99% - 24.99%
✔ Loan term: 3 - 7 years
✔ Funding turnaround: within 24 hours

With Discover personal loans, borrowers can apply up to $35K in funding as fast as next business day. Best for those who want to consolidate debt and have a good credit score.

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Payoff: borrow $5,000 - $40,000 at 5.99% - 24.99% (minimum credit score 600)

Payoff

✔ Funding: Borrow $5,000 - $40,000
✔ Minimum Credit Score: 640
✔ APR: 5.99% – 24.99%
✔ Loan term: 2 - 5 years
✔ Funding turnaround: 3 - 6 business days

Payoff offers personal loans with flexible payment schedules and perks such as monthly credit score reporting.

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SoFi: borrow $5,000 - $100,000 at 4.99% - 19.63% (minimum credit score 680)

SoFi

✔ Funding: Borrow $5,000 - $100,000
✔ Minimum Credit Score: 680
✔ APR: 4.99% to 19.53%
✔ Loan term: 2 - 7 years
✔ Funding turnaround: 1 - 3 business days

With SoFi personal loans, borrowers can get access to up to $100,000 with APR starting as low as 4.99% with extra bonus perks ($500 for each funded loan) and fast turnaround time. 24/7 customer support available.

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Why should you consider consolidating credit card debt?

Consolidating credit card debt is nearly always a good idea - the only time it wouldn’t be is if your interest rate on your credit card(s) is lower than what you can get with another financial product. We’ll explore the different options available to you shortly. Some of the reasons people choose to consolidate credit card debt are:

• To pay a lower interest rate (and thus total cost) for their debt
• To refinance a large purchase or bill they had to make quickly (such as paying for car repairs or healthcare)
• To make it easier to become debt-free
• To roll their debt into a personal loan which will be paid off via fixed monthly installments, instead of left in their hands to pay off
• To avoid an increase in interest rate after an introductory period on a credit card

How to Consolidate Credit Card Debt

Personal loans are the most common form of debt consolidation, but there are other options. Here are the different debt consolidation options you should consider:

• Personal Loans: This is the most popular option because personal loans often have low interest rates and they ensure you pay off the debt over a fixed term. Credit cards require you to pay a minimum monthly payment but it will typically take an extremely long time (think the length of a mortgage) to pay off credit card debt by minimum monthly payment alone. That means it’s up to you to make bigger payments to pay it off. A personal loan has the benefit of making you pay off the debt without thought - as long as you pay the monthly payment, you’ll pay off the debt within the fixed term of the loan.A personal loan is essentially a lump sum amount you borrow from a lender you can use for any purpose, including debt consolidation, and pay back with a fixed monthly payment over a fixed term, typically 3-5 years for debt consolidation purposes.
• Balance Transfer Credit Cards: Another option is to use a balance transfer credit card. These cards are credit cards with an introductory offer that gives you a low (typically 0% - 5%) interest rate for a fixed period, generally 3-21 months, depending on your creditworthiness. This is a good option if you have a smaller balance you want to pay off relatively quickly (less than 12 months) and want to avoid paying a lot of interest as you do so, especially if you have a high credit score. If you have a large balance or a mediocre credit score, this won’t be the best option for you.
• HELOC: A Home Equity Line of Credit is another option, though should really only be considered if you have no other options and you’ll struggle to make more than the minimum payment on your credit cards. This is where you gain access to a line of credit (much like what you have with your credit cards) but it is secured by the value of your home. This allows you to borrow as needed at a much lower interest rate, but you need to be careful, as defaulting will put your home at risk. If you consider going this route, have a strong plan in place for what you’ll do with your credit cards after the fact and how you plan to better manage your finances so it can’t happen again.
• 401(k) Loan: If you have a 401(k) plan that allows you to take out a loan, you can consider getting a loan from your own future finances rather than borrowing from a lender. 401(k)s tend to have strict rules around how you can do this and the timeframe in which you must pay it back, but if you can do so, they’re well worth considering.