consolidate debt

When Should You Consolidate Your Credit Card Debt?

If you have multiple high-interest credit cards, consolidating your credit card debt might be a smart choice. Consolidating your debts simplifies your budget and can even help you pay off debt faster. The financial professionals at MPowering America specialize in helping households get out of debt. We can help you decide whether debt consolidation is the right choice for you.

What Is Credit Card Debt Consolidation?

Debt consolidation is an ideal option for you if your consolidated debt has a lower APR (annual percentage rate) than the APR of your credit cards. This can help you by reducing your interest costs, making the payments much more manageable and shortening the length of time it takes to pay off your debts. 

Credit card debt consolidation is a type of debt reduction strategy that takes multiple credit card accounts, balances, and payments and combines them into one monthly payment to one lender. It is a helpful way to make sure you are making all payments on time and staying on top of your multiple cards or accounts. 

Things To Do Before Taking a Consolidation Loan

Before you choose to consolidate your credit card debt, you should take a close look at your spending habits and spending history. Understanding why you are in debt can help you understand how to get out of it. 

If you’re routinely spending more than you are earning, then a debt consolidation loan likely won’t help you get out of debt. You’ll need to make some lifestyle changes like reducing your spending or increasing your income instead.

Next, sit down and make a budget. If you can adjust the way you spend your money for a period of time, you can create a debt payoff budget with realistic payments, and you may not even need a consolidation loan.

You can also try to reach out to your individual creditors. See if your creditors will allow you to lower your payments or switch things around in order to help you get out of debt faster. Some creditors may be willing to:

  • Accept lower minimum monthly payments
  • Waive certain fees
  • Reduce interest rates
  • Change monthly due date to match up to when you get paid

What to Know About Credit Card Debt Consolidation

There are several good reasons why credit card debt consolidation loans may be the right choice for you. Debt consolidation loans have a fixed interest rate, which means your monthly payment amount won’t change. 

Debt consolidation also offers low APRs for borrowers with good or excellent credit, and some lenders will also offer direct payment to creditors. You can use an unsecured personal loan from a credit union, bank, or online lender in order to consolidate your credit card debt.

However, keep in mind that there are also some potential cons to consolidating your credit card debt using a consolidation loan. If you have bad credit, it can be hard to get a low rate.  You could be better off keeping your current credit card payments if the consolidated interest rate or APR is higher than your individual credit cards. Also, if you choose to consolidate your credit card debt through a credit union, keep in mind that you will have to have a membership in order to apply for a consolidation loan.

Still Wondering if Consolidation Is The Right Choice?

If you’re on the fence about credit card debt consolidation, MPowering America can help! Use our debt reduction calculator to enter all of your debts in one place and find out if consolidation is the right debt reduction plan for you. You can also reach out to one of our professional debt strategists. We are committed to helping Americans get out of debt! 

 

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Matt Lovelady is a co-founder of MPowering America. He is a financial expert who has been in the financial services industry for over 22 years. Matt is dedicated to educating people on how to increase their income and reduce their debt.