Credit cards may be considered among some of the easiest credit products to obtain. However, they come with the risk of accruing high-interest debt. If you have credit card debt, you’re not alone. Americans hold nearly $1 trillion of credit card debt. While credit card debt is far from unique, it can place a strain on your finances. So, what can you do about it? There are various options to consider, including a balance transfer credit card, a home equity line of credit (HELOC), a debt management program, or consolidating your credit card debt.
What Does It Mean to Consolidate Credit Card Debt?
Consolidating your credit card debt is exactly as it sounds; you consolidate or combine multiple debts into a single larger debt with the goal of obtaining more favorable terms such as a lower interest rate or lower monthly payments. One of the most common ways to consolidate debt is through a personal loan or a debt consolidation loan.
Once you’re approved for a debt consolidation loan, you can use the loan money to pay off your credit cards. Depending on the institution financing your loan, the lender may pay your creditors directly or you may receive the funds personally to pay the credit card companies yourself.
Why Consolidate Your Credit Card Debt?
Credit card interest rates have long been high, but recent rate hikes by the Federal Reserve have caused record high rates of more than 20 percent. If you are unable to pay your balance in full each month, you pay toward the principal and that high interest. By consolidating your debt, you could avoid those rising rates.
Furthermore, if you’re like most Americans, who on average have four credit cards, your debt is likely spread across more than one credit card. By consolidating your credit card debt, you could decrease the number of monthly payments to a single, easy-to-manage payment. A single payment could make it less likely you’ll forget a creditor and miss a payment, which could potentially result in late fees.
Considerations before Consolidating Your Credit Card Debt
Before you consolidate your credit card debt, be sure it will be in your best interest. Determine how much you owe on each credit card, your various interest rates, and your minimum monthly payments. Understanding this information will help you determine if a debt consolidation loan may benefit you financially.
Also, you may want to research personal loan options. Banks and lenders offer different interest rates, fees, and payment schedules. Think about your financial needs and check reviews for lenders as well.
If you decide a personal loan for debt consolidation will fit your needs, you’ll need to apply for the debt consolidation loan. Be mindful of how many loans you apply for and over how long of a time period. Lenders will run credit checks as part of the application process, which can impact your credit score.
Lenders typically consider several factors, in addition to your credit score, such as the amount of money you request to borrow and your income. You’ll likely also need supporting documents for your application, including:
- A copy of a valid, government issued photo ID (e.g., driver’s license or passport)
- Social Security card
- Proof of residence (e.g., a driver’s license with your current address, a utility bill, or a signed lease)
- Proof of income (e.g., paystubs or tax returns)
- Your recent tax return and copy of bank statements
Many lenders offer online applications that can be completed in approximately five minutes and you may even receive same-day approval.
Is a personal loan right for you?
Personal loans may be able to help tackle credit card debt, but always do your research and consider any available options. If you think a debt consolidation loan might be right for you, contact Mariner Finance at 866-382-5080 to learn more.