How to Payoff Credit Card Debt with a Consolidation Loan

Too many Americans are carrying enormous levels of debt. In fact, most Americans owe upwards of $10,000, usually to several different creditors. With so many payments to be made on different schedules, it can be nearly impossible to find a realistic way of paying them off.

The snowballing late fees and interest rates can keep these Americans unable to escape this debt trap. Fortunately, few debt consolidation can bring unmanageable debt under control once again.

Credit card debt is the number one reason Americans lose their homes, their savings, and have to eventually declare bankruptcy. Credit card debt is also the cause of stress in many relationships and is the direct or indirect cause of many divorces.

Pay High interest rate Credit Card First

There are no exceptions to this rule. A higher interest rate will always cost more money in the long run.

Consolidating Debt With a New Credit Card:

 Should a consumer consider switching debt from one credit card to another? Check the fine print before transferring a balance. Often credit card companies try to sweeten the deal by advertising zero to very low interest rates on balance transfers for a period of time.

Then after the time period is up the amount of debt left is charged at a usually much higher rate of interest. This situation is only a good deal if a credit card consumer can pay the amount of the debt in full at this low rate, otherwise they run the risk of accruing higher interest rates on the debt.

Credit Card Debt Consolidation Loan:

 Are you currently paying down a great deal of credit card debt that they have racked up over the months or years? If you are, you probably agree that handling multiple bills with varying interest rates can be quite a hassle.

One effective strategy that can help you is consolidating credit card debt, such that you have just one debt to pay off each month, with a low interest rate, is to get a consolidation loan.

Debt Consolidation loan Companies:

Consolidating multiple loans into a single, easy to pay loan used to be too difficult for most people to manage. It involved filling out many loan applications at many different banks, and often took months of effort. Today, though, there are unsecured loan companies that do the work for you.

Applying for a debt consolidation loan is a straightforward, simple process. It involves nothing more than filling out a few short forms, usually online. Once applied, consolidation loan lenders send you a list of loan offers without affecting your credit ratings.


  • Must be employed or self-employed.
  • No collateral required
  • Show proof of income bank statements or paystubs
  • Min credit score 550+
  • Must have SSN, driver’s license number.
  • At least one checking & saving accounts.
  • Stable work history.

Choose the best loan term and rate, e-sign the loan agreement and receive the loan amount within 1 to 4 business days.

Below is an example of $5,000 consolidation loan with 630 credit for 36 months term.

debt consolidation loan companies

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Consolidation Loan Benefits

With a debt consolidation loan, you only have to make a single payment each month. This lets you manage your budget much more easily.

Because you have only one loan, your overall interest rate is lower, and your repayment term is longer. This makes your payments lower, allowing you to keep up with them much more easily.

A debt consolidation loan can prevent you from defaulting on your current loans.

The money you save on your interest rate can make your total payments a lot lower, as well. When you carry multiple loans and credit card debts, you can easily find yourself paying 29 percent interest. A debt consolidation loan can save you literally hundreds of dollars every month. It can help you avoid loan defaults and bad credit reports.

Debt Consolidation Loan Rates & terms:

Consolidation loan rates start at 4.99% to 36%, including origination fees. Possibility of getting a lower interest rate is high, if you have a low debt to income ratio, with good credit score, and monthly income.

You can get term up to 5 years with a fixed monthly payment. There are no prepayment penalties.

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Consolidation Loan Drawbacks

You have to take care when choosing a consolidation loan. If the term of the loan is extended too much, the total price you pay in the long run can increase by a lot.

Debt consolidation loan companies bbb accredited:

It is important to use only reputable consolidation companies, and to check the loan terms that are offered to avoid difficult or fraudulent loans. A good consolidation company should have most of these features:

  • No hidden charges
  • No application fee
  • Simple, short applications
  • Loan fees that are approximately the national average
  • Acceptance of applicants with bad credit
  • Good customer service
  • A website with easy-to-find information

Never trust a consolidation company with only a few of these features, no matter what kind of offer they make.

Pick a Lender

A Bit of Math

For example, a consolidation loan of $16,000 with an interest rate of 5.95% would result in a monthly payment of $486.39 for 3 years. The total repayment would be $17,510.04.

Compare that with a credit at 23.5%. The same credit card with the same payment would have you paying over $9,900 in interest and still take an extra year and a half to pay off.

payoff credit card debt

A debt consolidation loan can help to get the payments under control and keep interest in the reasonable range.

Sound great. Is it for me?

Maybe. Not everyone can benefit from a consolidation loan.

If the amount you owe is small, it’s not worth moving it. This might not be true if the amount is enough to cause a collector to chase you and you don’t have the money now. A loan can buy you a bit of time by reducing your payments.

The Takeaway

When looking for a debt consolidation loan, be patient and take the time to find the package with the best balance of long and short term needs. If you take the time to do the research and carefully consider your options, debt consolidation loans can be the key to getting out from under an unmanageable amount of loan and credit card debt.

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What about my credit score?

A debt consolidation or personal loan can help to strengthen your credit rating. Since you only have one reasonable payment to budget for, you can make your payments on time. You can schedule that one payment around paydays, instead having a constant stream of cash going out.

When you are late on credit card payments, they show up on your credit rating. One bad month can result in a dozen negative marks on your credit report. If you struggle with a debt consolidation loan, there is only one group to call for help.

Can I prepay the consolidation loan early?

Usually, yes. Most online lenders offer no prepayment penalty. In fact, if they don’t, don’t borrow from them; being able to pay your loan balance faster can be a great way to make the loan go away faster and will help your credit score.

Check Your Rate

Can i apply for credit card debt consolidation with bad credit?

If you are looking for a bad credit loan, this might not be the loan for you. This is a loan designed for people with fair to good credit. In other words, this is usually a loan for the people who are getting out ahead of their financial problems.

Debt Relief Companies:

 Getting a loan to consolidate credit debt with bad credit is not a good option. For bad credit, consolidation loan APR will be higher than your present credit card debt. So its better to look for debt relief companies.

Many of these so called debt relief companies are downright scams. They sound appealing to people who are drowning in debt and desperate to decrease their monthly bills. Consumers need to be aware that the Federal Trade Commission (FTC) has sued many of these debt relief companies for fraudulent activity (FTC, 2008).

But even if a credit card debt relief company has been thoroughly checked out and is deemed a reputable business, this type of company cannot do anything a consumer can do for themselves.

A debt relief company does not wave a magic wand to wipe out credit card debt. The most they can do is lower the annual percentage rate (APR). The enormous fees that a debt relief company frequently asks for will only add to a consumer debt problem.

In addition, if I have good or excellent credit?

Go for an unsecured personal loan. The interest rate will be lower and you will have even better credit when you done paying it off.

Negotiate Credit Card Debt

Many people find it unbelievable that they can negotiate their credit card debt. If a consumer finds that the current interest rate on their credit card rate is too high, they can call the bank and ask for a lower rate.

This tactic works particularly well for consumers with an excellent credit rating score. An excellent credit score is considered to be 750 and above.

Why this works for consumers with an excellent credit score is because banks know that people with these scores are extremely punctual about paying their bills – they always pay on time to retain their excellent credit score. The banks know they can always rely on these consumers to get their money.

Credit card holders can ask for a lower rate, and if denied a lower rate can state that they will then do business elsewhere (transfer their balances to another card).

This is the last thing a bank wants to hear, because it’s better to get a smaller amount of money from a credit card holder than nothing at all.

Monitor Finance Charges

Finance charges are listed on the bottom of a credit card holder’s monthly statement. Banks sometimes have a sneaky way of increasing interest rates, so it’s a good idea for a credit card holder to continually monitor these charges.

Credit card debt will reduce a person’s freedom to do what they want with their money. It can be difficult to get out of debt once a credit card holder has racked up a substantial sum, but with a little financial know-how and persistence it can be accomplished.

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