17
Mar
2020

3 Things You Should Know About Debt Consolidation

Struggling to get out of debt? Feels like you’re barely making a dent in the interest? Here’s how to consolidate credit card debt.

debt consolidation

Did you know that only 23 percent of Americans have no debt to worry about? So if you’re like the majority, you probably find it hard to pay your credit cards, mortgage, and other loans each month.

When you can afford to make payments but just need a lower payment amount, consider debt consolidation. This involves merging all of your credit card and possibly other debts too into a single payment. You just have to do work to make sure you don’t continue to add debt during the process.

Read on to learn how to consolidate credit card debt as well as what important details you should know.

1. You Have Multiple Options for How to Consolidate Credit Card Debt

If you’re wondering how to consolidate credit card debt, it can be as simple as transferring all your balances to a single credit card or obtaining a new loan.

For example, you might find a new credit card with zero interest for a set amount of time. If you qualify, you can simply transfer the balances and enjoy a lower monthly payment. But keep in mind that balance transfer fees can apply.

You can also obtain a debt consolidation loan or a personal loan from a bank. This will allow you to combine credit card debt with other debts for a single convenient payment. In some cases, you might be able to use your home’s equity to get this loan.

If you’re unsure which debt consolidation solution works for you, consider contacting Debt Hunch for help with a custom plan.

2. Your Debt Won’t Be Reduced, But You Can Still Save

Although you can get a smaller overall monthly payment, know that you’ll not see your debt wiped away due to consolidation. You’d need to file for bankruptcy for that kind of option or settle privately with your debtors.

However, you can potentially get a lower interest rate that makes it easier to pay off your debt. Just know that you’ll often end up with a longer payment term, so weigh the benefits of a lower interest rate against the extended loan term. Also, if you have poor credit, your interest rate might not help be as low as you’d want.

3. There Are Some Limitations to Know

Before you start a debt consolidation program, know that you may have some other fees that can impact you financially. For example, a debt consolidation loan might have a high origination fee, so you’ll want to make sure you actually do save much in the end.

Also, not all debt consolidation options work for accounts in collections. So, check what will be included before you agree to a program.

Consider Beginning the Debt Consolidation Process

Now that you know how to consolidate credit card debt, take a look at your financial situation and credit profile to explore your options.

If you’ve got great credit, you might get the best deal with a zero-interest credit card as long as you can pay it off before the promotional period ends. When your debt problems go beyond credit cards, a debt consolidation loan can make the most sense.

Be sure to explore our other personal finance content.

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