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Credit cards can be a very useful tool when utilized properly in the context of effective monthly budgeting and building a healthy credit profile that can benefit an individual when seeking significant additional debt in the future, such as a home mortgage. Credit cards are also useful simply to have on hand in case of emergencies.
However, when credit cards are used improperly to live beyond one’s means for an extended period of time, a situation can develop in which multiple high-interest rate balances are owed to multiple creditors on varying payment schedules throughout the month.
This scenario can prove both costly and inconvenient, with interest expense steadily accumulating over time and monthly bills getting juggled in an effort to avoid the consequences of missed or late payments. However, credit card consolidation loans can represent a pathway out of this type of situation. Let’s take a closer look.
Credit Card Debt Consolidation
If you carry multiple credit card debt balances spread out among a variety of different creditors, pursuing a credit card consolidation loan can make a lot of sense. Simplifying the number of payments down from a number of different creditors to just one single creditor makes the monthly process of paying credit card bills easier.
In addition, you’re also likely to save money in the form of lower interest expense per month, and this can allow you to pay off more of the principal owed, thereby leading you out of debt in less time.
Introductory promotional rate credit cards offering balance transfers represent one way to consolidate credit card debt, though these promotional rates often expire within 12-18 months and APR’s go much higher after the promotional rate expires. For longer repayment duration’s of a few years or more, fixed-rate credit card consolidation loans (also commonly referred to as personal installment loans) provide a viable solution.
Credit Card Consolidation Lenders
There are a number of credit card consolidation lenders that offer personal installment loans of longer duration with interest rates as low as 6-7% to borrowers with credit scores in the 600s and higher. Like all lenders, Earnest examines credit scores, and prefers scores of 680 or higher.
However, it also goes beyond to examine employment history, savings patterns and investments. For those who qualify, 3- to 5-year fixed rate installment loans at rates as low as 6.99% for amounts as high as $75,000 are available.
Speaking of large-sized credit card consolidation loans, SoFi offers amounts as high as $100,000 at rates as low as 5.99% for durations as long as seven years. Additionally, as in the case with Earnest, applying for a SoFi personal loan does not involve a hard credit pull that impacts a credit score. Furthermore, SoFi does not have a minimum credit score requirement – though better terms go to those with stronger credit scores and profiles.
Personal Installment Loans
If your credit score is at least 640, Freedom Plus offers fixed-rate personal installment loans of up to $40,000 at rates as low as 5.99% for duration’s of up to five years. When considering loan approval and terms, Freedom Plus also examines quantity of retirement savings, allows for co-signors and requires that a minimum of 50% of loan proceeds be allocated toward paying off debt.
In the case of credit card debt consolidation, that final requirement should be easy to meet – as the sole purpose of taking out the personal installment loan is to consolidate all existing higher interest-rate credit card debt.
Meantime, Lending Club, a large peer-to-peer lender – the site matches borrowers with lenders who fund loans – offers APR’s as low as 6.16% for three or five years, amounts up to $40,000, and accepts credit scores as low as 600.
Lending Club does, however, charge a 5% origination fee that cuts into the final amount of proceeds received from the loan.