Credit Card Debt Consolidation Loan Rates

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Credit Card Debt Consolidation Loan Rates – Our goal here at Credible Operations, Inc., NMLS Number 1681276, referred to below as “Credible,” is to give you the tools and confidence you need to improve your finances. Although we promote the products of our lending partners who compensate us for our services, all opinions are our own.

If you’re not sure how to best deal with your credit card debt, this guide can help with debt consolidation vs. credit card refinancing. (iStock)

Credit Card Debt Consolidation Loan Rates

If managing your credit card balance is difficult, paying off those debts with a personal loan may be an option.

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Sometimes this is called debt consolidation. Others may call it credit card refinancing. In either case, this means converting your card balances into a personal loan, which will then be paid off each month over time.

Here’s what you need to know about debt consolidation and credit card refinancing. If you’re thinking about converting credit card debt to a lower personal loan, Credible makes it easy to compare personal loan rates from multiple lenders.

Credit card refinancing is when you use another financial product, often a personal loan, to pay off your credit card balance. You then make monthly payments on the loan until it is paid off in full.

This process can allow you to get a lower interest rate (credit cards have very high interest rates compared to most personal loans), and it also makes payments easier so you only make one payment per month instead of several.

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Credit card refinancing is usually best for borrowers who have decent credit and can qualify for a personal loan at a lower interest rate than their credit card.

Banks, credit unions and online lenders usually offer personal loans that you can use to finance credit card debt. This requires a credit check and some form of financial documentation.

The lender you choose will depend on several factors, including your credit score and how quickly you need loan financing. For example, some online lenders can fund loans as quickly as the next business day after the loan is approved.

It’s a good idea to compare personal loan rates from several lenders before deciding on a credit card refinance loan. Credibel makes it easy to see your default value in minutes.

What Is Better: Personal Loans Or Credit Cards?

In both scenarios, you use a personal loan or other type of credit product to pay off credit card and other debt you have. This essentially replaces your debt with a single loan that you can pay off over time.

Refinancing your credit card and using a balance transfer card have the same general principles, but the two can have very different results. With refinancing, you get long-term payments at a fixed rate. It increases the repayment of most of your debts and often results in lower interest rates as well.

With a balance transfer card, you use a new credit card to pay off another card (or more). These cards come with low introductory interest rates, often as low as 0%, that expire after 12 to 18 months. At that point, the percentage increases significantly.

While a balance transfer card can save you interest if you pay off the balance before the end of your introductory period, if you can’t pay off the balance on your new card during that time, it could mean higher interest rates in the long run.

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The right choice depends on your balance, interest rate, credit score and other factors. In general, a balance transfer may be a good idea if:

Here is an example. Let’s say you have $10,000 in credit card debt and your bank offers a balance transfer card with 0% interest for 18 months. In this situation, you must pay at least $555 each month to pay off the balance before your introductory rate expires. If that’s not possible, a personal loan may be a better option, offering you a longer repayment schedule and lower monthly payments.

You don’t need a perfect credit score for a debt consolidation loan, but the higher your score, the more likely you are to qualify for a personal loan with the amount you need and a favorable interest rate. Generally a minimum score of 650 is required to qualify and a score of 720 may make you more suitable for APRI at best.

If you are below this limit, you can try a bad credit debt consolidation loan or try to improve your score before applying.

Borrowers Who Consolidated Credit Card Debt Saved $2k+ On Average, Data Shows

When you’re ready to move forward with your loan or balance transfer credit card application, be sure to shop around. Prices, fees, terms and eligibility requirements vary by provider, so comparing at least a few different lenders and credit card companies can ensure you’re getting the best deal. Personal loans offer a way to pay off credit card debt with fixed interest rates and low monthly payments. (iStock)

Making the minimum payment on your credit card can be an expensive way to get out of debt, and it’s even more frustrating when even the minimum payment is out of reach. Because credit card interest accrues daily, it can take years to pay off your balances, even if you don’t miss a payment.

Fortunately, there are faster (and cheaper) ways to pay off credit card debt, such as a credit card consolidation loan. This is a type of personal loan that you pay in fixed monthly payments at a lower interest rate. Consolidating into a new loan can even help you pay less than the minimum credit card payment while getting out of debt faster and saving money over time.

Read on to learn how to lower your credit card payments with a personal loan. You can visit Credible to compare personal loan rates for free without affecting your credit score.

Debt Consolidation Vs. Credit Card Refinancing: What’s The Difference?

Credit card companies may allow you to borrow up to a certain limit while making low minimum payments, sometimes as low as $25 or a small percentage of the total balance. But the more debt you have, the higher your minimum payment will be and the longer it will take to pay off your balances.

For example, if you have $10,000 in credit card debt, your monthly payment could be as high as $400, or 4% of the total balance. Since the average credit card interest rate is 16.44%, according to the Federal Reserve, it will take more than 12 years to pay off the debt with interest and fees.

It may be possible to lower your monthly payments and pay off your debt faster with personal loan consolidation. This is because interest rates on personal loans are lower than those for credit cards. In addition, the personal loan interest rate is fixed for the entire term, which means that the interest does not increase every day.

Paying off $10,000 in credit card debt with a 3-year personal loan can lower your monthly payment by $76 per month. By refinancing a 5-year personal loan, you can save $172 a month compared to the minimum credit card payment.

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By paying off debt faster, you can save more money in interest costs over the life of the loan. Interest rates on short-term loans are lower, which means you can save about $3,500 over time by choosing a 3-year loan term compared to the minimum credit card payment. But even if you choose a five-year personal loan with low monthly payments, you can still save about $1,400 as you pay off your debt.

You can visit Credible to see the personal loan rate that’s right for you with a soft credit check and use the personal loan calculator to calculate your new monthly payment.

Paying off your preferred credit card balance is relatively simple with a personal loan, and it can be done entirely online without leaving the comfort of your home. Here’s how the process works in five steps.

You can consolidate one or more credit card balances into one personal loan. Add up your credit card balances to determine the amount of personal loan you should take out.

Credit Card Debt Consolidation Loan Calculator

Be careful not to borrow too much, or you’ll end up paying interest on the amount you don’t have to pay off your credit card debt.

Since personal loans are unsecured and require no collateral, lenders determine your eligibility and interest rate based on your creditworthiness. This includes your credit score and debt-to-income ratio, which is your debt payments divided by your monthly income.

Applicants with good or excellent credit, defined by the FICO score model as 740 or higher, will qualify for the lowest personal loan rates. On the other hand, borrowers with bad credit will find it difficult to qualify for a personal loan with good terms.

Knowing your credit score can help you decide if you’re a good candidate for credit card consolidation. You can check your credit score and sign up for free credit monitoring with Credible.

How Does Debt Consolidation Hurt Your Credit?

Shorter loan repayment terms usually offer lower interest rates but higher monthly payments. But because you pay off your debt faster, you’ll save more interest over the life of the loan.

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