Credit Card Consolidation

High-interest credit card debt is a burden on your finances. Even when you’re making payments every month, it can feel like you’re not making progress in paying down your debt. Credit card debt consolidation can make repayment easier.

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What is credit card consolidation?

Credit card consolidation involves combining all of your credit card debt using a new loan. You’ll only need to make one monthly payment, helping make it easier to track your debt payoff progress. Consolidating credit card debt at a lower interest rate can help you:

Save money on interest payments over the life of the loan.
Pay off your debt faster, since you’re putting less toward interest.
Lower your monthly payment and repay your debt over a longer period of time.
Improve your credit score by lowering your credit utilization ratio.

Personal loans and balance transfer credit cards are just a couple different ways you can consolidate your credit card debt.

Ways to consolidate and pay off credit card debt

The best way to consolidate credit card debt will depend on your financial situation. You should consider your credit score, how much you can afford to repay each month and the amount of your credit card debt, for instance. Before you choose a debt consolidation strategy, weigh your options and choose the best method for your unique financial situation.

Personal loan for credit card debt consolidation

Pros	Cons
One payment per month. APRs and payments are fixed. No collateral required for unsecured loans.	APRs are high for subprime borrowers. Fees and penalties, including an origination fee of 1%-8% the total cost of the loan. Borrowers with bad credit may not qualify.

Best for: People with good credit but a significant amount of credit card debt.

Personal loans are lump-sum loans that are repaid in fixed monthly payments over a set period of time. They’re typically worth up to $50,000, and they can be used to pay for virtually anything, including high-interest credit card debt. Using a personal loan to pay off credit card debt can help you secure a lower interest rate on your debt and pay it off faster.

Since personal loans are typically unsecured, meaning they don’t require collateral, lenders rely heavily on your financial history to determine interest rates and eligibility. Your credit score and your debt-to-income (DTI) ratio will factor into the personal loan offers you receive. Take a look at how much a borrower with excellent or good credit could save by consolidating their credit card debt with a personal loan:

Paying off $15,000 in credit card debt with a personal loan
	Credit card	Personal loan
Credit score	Average	Excellent (760+)
APR	19.33%*	10.46%**
Monthly payment	$392	$384
Time to pay off	5 years	4 years
Interest paid	*$8,479*	*$3,421*
Estimated credit card APRs using Jan. 2021 LendingTree data. Estimated personal loan APRs using Jan. 2021 LendingTree data*.

When consolidating debt with a personal loan, it’s important to shop around with multiple lenders to make sure you’re getting the lowest possible APR for your financial situation. You may be able to compare personal loan offers on LendingTree’s personal loan marketplace. This is called prequalification, and it will not affect your credit score.

See personalized offers

How to consolidate credit card debt with a personal loan

Check your credit score and scan your credit report for errors. You can get your free credit score on the LendingTree app. Request a free copy of your credit report from all three credit bureaus on AnnualCreditReport.com.
Research estimated APRs for your credit band. The lowest personal loan APRs are reserved for borrowers with an excellent credit history. People with subprime credit may qualify for a personal loan with a high APR, if they qualify at all.
Shop for a personal loan with a lower APR than your credit card debt. This will help ensure you can consolidate credit card debt and save money in the process. Many lenders let you see your estimated APR without a hard credit check.
Formally apply through a lender. If you see an offer you like, you’ll have to submit a formal personal loan application. This will require a hard credit check, and the lender may ask for identifying information and documents.
Receive your money, and use it to pay off your credit cards. If approved, your personal loan will typically be deposited right into your bank account within a few business days. You can use the funds to pay off one or multiple credit cards.

Balance transfer credit card

Pros	Cons
May qualify for introductory low APR or 0% APR promotion. Credit card debt will be rolled into one payment. Pay off debt on your own timeline.	Not all borrowers will qualify. May have to pay a balance transfer fee of 3-5%. Limited time to pay off debt before regular purchase APR is applied.

Best for: People with good credit scores and a small amount of debt.

One popular way many people consolidate their credit card debt is by transferring their balances to a single balance transfer credit card. Sometimes, these cards will have introductory rate grace periods as low as 0% APR, giving you a set amount of time to repay your debt at zero interest.

If you can pay off your balance within the introductory rate time frame — typically up to 18 months — you’ll save significantly on interest. However, not all borrowers will qualify for an introductory 0% APR offer. Typically, you will need a good credit score (at least 700) to qualify for a balance transfer credit card. Further, your total debt should be an amount that you can realistically pay back within the introductory rate time frame.

Balance transfer card marketplace

Home equity loan for debt consolidation

Pros	Cons
Secured loans have lower interest rates than unsecured debt. One payment per month. APRs and payments are fixed.	Your home is used as collateral. Fees, including closing costs. It can take a few weeks to close on a home equity loan.

Best for: People with equity in their home and the ability to diligently repay their debt.

Home equity loans can also be used to pay off high-interest credit card debt at a lower interest rate. To qualify for this type of loan, you’ll typically need to have at least 15% equity in your home. Calculate your home equity by subtracting the amount you owe on your mortgage subtracted from your home’s value.

When you open a home equity loan, you’re putting up your home as collateral to the lender. This can grant lower interest rates than with unsecured forms of debt, like personal loans and credit cards, but it also comes with a large amount of risk. If you don’t repay your home equity loan, you could lose your home.

You should also account for closing costs and other fees to make sure using a home equity loan for debt consolidation is worth it.

Home equity loan marketplace

401(k) loans to consolidate debt

Pros	Cons
No credit check required. Borrow from your own retirement savings. Low interest rates, which you pay back to yourself.	May face an early withdrawal penalty and tax obligations. If you lose your job, you may have to repay the loan in 90 days. Not all 401(k) plan servicers allow this.

Best for: People with robust retirement savings and the ability to repay the loan.

Borrowing against your retirement savings using a 401(k) loan is one way to pay off credit card debt. 401(k) loans allow you to borrow up to $50,000 or half the vested amount, whichever is less. You’ll have up to five years to repay the loan, and you must make payments at least quarterly.

Assuming you are confident you will be able to repay the loan, there are a handful of benefits to borrowing from your 401(k) to pay off credit card debt. You’re borrowing from yourself, so it will be fairly quick and easy to access the loan. Plus, your credit score will not be checked, and the loan will not show up on your credit report. Interest rates are low, and you’re paying interest back to yourself.

It can be tempting to borrow against your 401(k), but you shouldn’t make this decision lightly since you’re dipping into your retirement nest egg. Plus, if you lose your job, you’ll be forced to repay the 401(k) loan within 90 days. Otherwise, you’ll have to pay an early withdrawal penalty if you’re younger than 59 ½ as well as taxes on the loan.

Debt management plan

Pros	Cons
Won’t affect your credit score. Get access to free educational materials and advice from a professional. Credit counselors may be able to negotiate lower interest rates on your debt.	Enrollment costs and monthly fees can add up. You must close your credit card accounts. It’s easy to mistake a for-profit debt relief/settlement company for a credit counseling agency.

Best for: People who may not qualify for other debt consolidation options.

If you’re unsure which debt consolidation strategy is right for you, consider a debt management plan through a nonprofit credit counseling agency. Debt management plans roll all of your debt payments into one monthly payment for a low monthly fee, which may be waived if you meet certain income requirements.

When you enroll in a debt management plan, you simply pay the credit counseling agency each month, and they will disperse your money to your various creditors. Plus, your credit counselor may be able to negotiate lower interest rates with your creditors on your behalf.

Another benefit of contacting a credit counseling agency is that they can educate you on healthy financial habits. You can get out of debt while learning everything you need to in order to avoid making the same mistakes again.

To avoid potential scams, make sure you’re contacting a certified counseling agency, not a debt relief or settlement firm. See the Federal Trade Commission’s (FTC) guide on choosing a credit counselor for more information.