best way to consolidate credit card debt

Lenders also use your credit report and information from your application to make a decision, so your supporting data could help you get approved. If youre close to retirement age, taking out a 15- to 30-year loan may not be a good idea. You also can qualify for a loan with a lower credit score by applying with a co-signer or by applying for a loan with a lender that specializes in bad-credit borrowers. You make one monthly payment to the company (usually by automatic transfer from a checking account), which then pays all your creditors for you. Even if the interest rate isnt lower, consolidating debts into a new mortgage still could help you save money if you have very high rates on your credit cards. What if you're in so much debt, you can't make monthly payments even if you consolidated your debt? Choosing the best way to consolidate your credit card debt depends on your individual situation. A Red Ventures company. If you move your balance but dont pay off the full amount before the rate reverts to its normal level, it wont be long before youre heading back to debt. LightStream offers loans in all 50 states plus Washington, D.C. and Puerto Rico, and applicants can contact the lenders customer support team seven days a week; current borrowers have access to customer support from Monday through Saturday. Similarly, you can take out a fixed-rate debt consolidation loan to pay off your debt. Best Parent Student Loans: Parent PLUS and Private, consolidating your debt with a personal loan. You'll decrease your retirement account. Consolidating your debts with a personal loan could help you manage your debt more effectively and save money on interest over time, but there are still some advantages and disadvantages to consider if you choose to take out a loan: One of the best ways to consolidate credit card debt is using a 401(k) loan. We'd love to hear from you, please enter your comments. The money is deducted directly from your paycheck before taxes are withdrawn, so it can greatly reduce your income tax liability. Get A If you can't pay the debt off before the 0% APR ends, then determine how much you can pay per month to decrease your debt. If your employer lets you borrow from your 401(k), the process is relatively quick. Credit card issuers give you a monthly minimum payment, often 2% of the balance. These cards are useful for making large purchases and paying them down over time. Its important that you make payments on time every month. For instance, debt consolidation loan companies look at your credit report, debt-to-income ratio, employment history and income. Achieve (formerly FreedomPlus) is an indirect lending platform that offers personal loans underwritten by Cross River Bank or MetaBank. To be eligible, applicants also must have a minimum credit history of three years, no current delinquencies and a debt-to-income ratio under 50%. This means a borrower can use loan funds to cover things like medical costs, credit card consolidation, home improvements and relocation costs. However, this does not influence our evaluations. starts with listing your debts. You're basically giving up free money. The snowball method of paying down your debt uses your sense of accomplishment as motivation. If youre applying for a personal loan, you may need a co-signer to increase your chances of approval. However, many successful applicants have a score of 700 or higher. Applicants with excellent credit also are more likely to get favorable terms. Balance-transfer credit cards are one of the easiest ways to consolidate credit card debt. That said, Best Egg does not directly pay off creditors, so youll have to manage the repayment process on your own. Otherwise, borrowers may not receive loan funds for up to seven days. Balance Transfer Credit Card If youre close to paying off your credit card debt, consider consolidating your balances onto one card. Right now, the top balance transfer credit cards are offering 0% annual percentage rates with introductory periods from 12 to 21 months. If you find discrepancies with your credit score or information from your credit report, please contact TransUnion directly. She was previously the health writer for Livestrong.com and a freelance writer for publications like Refinery29, Business Insider and MTV News, where she focused on issues that affect marginalized communities. To learn more about how Forbes Advisor rates lenders, and our editorial process, check out our Loans Rating & Review Methodology. Eligibility:LightStream recommends applicants have good to excellent credit before applying for a personal loan. Eligibility: To qualify for a Happy Money debt consolidation loan, applicants must have a minimum credit score of 640, though approved applicants have an average score of 705. This means that, in addition to possibly qualifying for a lower interest rate, you may be able to reduce your monthly debt service by extending your loan over a longer period. Improved credit score: Likewise, the origination fee of between 1.99% and 4.99% of the loan amount can make the loan more expensive. As with many other lenders, however, loan proceeds cannot be used for post-secondary educational expenses, purchasing or carrying any securities or illegal activity. When youve paid off that, you roll that payment into the amount youre paying toward the next smallest, and so on. And while our site doesnt feature every company or financial product available on the market, were proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward and free. Here are five credit card debt consolidation options that you can consider when paying off credit cards: 1. Happy Money specializes in helping borrowers eliminate their high-interest debt, and will pay off members outstanding credit balances directly. Youll then pay the counseling agency a fixed rate each month. You can start working toward paying off $20,000 in credit card debt by developing a battle plan that includes using consolidation options, cutting back in other areas of your budget, earning more money and more. We chose the best lenders based on the weighting assigned to each category: Within each category, we also considered several characteristics, including available loan amounts, repayment terms, APR ranges and applicable fees. Lending terms are available from two to five years. Comparative assessments and other editorial opinions are those of U.S. News Founded in 2011, SoFi has extended over $50 billion in loans and stands out for allowing high loan amounts and its availability of extended loan terms. Lead Assigning Editor | Personal finance, credit scoring, debt and money management. However, funding times may be longer than a few daysespecially for loans over $20,000. Here's an explanation for how we make money If you have the ability to Avoid using your credit cards during this time and continuing to add to debt and be sure to make payments on time and in full each month. Because this is deducted from your loan proceeds, youll need to factor this in when determining your loan amount to ensure you receive the necessary amount after the fact. Manage your finances in the face of rising prices, market volatility and recession worries. Some of these plans don't allow you to continue to contribute to your 401(k) if you borrow from it. She has over 5 years of experience reporting on issues that affect marginalized communities. Typically, you hire a debt settlement company to negotiate with your creditors on your behalf. Expect loan approval and funding to take one to three business days, although some customers may receive same-day funding. Pay off Though you will have to pay interest, interest rates for personal loans tend to be lower than for credit cards, which can still help you save some extra cash. Although you may be able to get some of your debts removed from your credit report under the program, you may still show as having too much debt per available credit limit. WebHowever, if you have a low credit score and dont qualify for other credit card consolidation methods, a debt management plan may be the best way forward. Consolidating credit card debt with a personal loan can help to an extent. Cash-out auto refinance. LightStream is a consumer lending division of Truistwhich formed following the merger of SunTrust Bank and BB&T. Why should you consolidate credit card debt? Loan funding can take up to four business days, but Upgrade makes loans available to those with poor credit history. Once you consolidate your debt, youll only have to make one monthly payment instead of multiple payments to different creditors. Loan uses: In general, SoFi personal loans are limited to use for personal, family and household purposes. The total loan amount should encompass all your high-interest debt. 5. Balance-Transfer Credit Cards Balance-transfer credit cards are one of the easiest ways to consolidate credit card debt. As with other top lenders, LightStream prohibits use of its personal loans for post-secondary education costs, business purposes and illegal activities. To increase their chances of approval, applicants also should have several years of credit history, including multiple account types, as well as an income that is stable enough to service current debts and a new LightStream loan. Hard inquiries can lower your score by up to five points, so this strategy limits the damage to your score. Reach out to your creditors to explain your situation. Its estimated that U.S. households that carry credit card debt will pay an average of $1,380 in credit card interest this year, according to the study. That said, depending on the interest rates on your current debts, the potentially high APR Achieve charges may make it more difficult to save money by consolidating. The platform stands out for debt consolidation because loans are available from $2,500 to $35,000 and terms extend up to seven yearslonger than is available for many other personal loans. By doing so, you can avoid paying various interest rates from each creditor, and instead consolidate your credit card debt and pay a single fixed interest rate. 2. The average amount of credit card interest being paid is rising as a result of Federal Reserve rate hikes and increasing amounts of revolving credit card debt. A debt management program (DMP) can help you reduce your interest rates, which means more of your monthly payment goes to the principal balance and less to interest. And these methods not only offer relief from your credit card debt, but they also give you more control over your financial future and eliminate the temptation to spend on your credit card by eliminating the card itself. Best Egg is a lending platform available to borrowers in every state except Iowa, Vermont, West Virginia and Washington, D.C. If the total amount you owe is more than you can pay each month and youre really struggling to get your debt under control, it may be time to take some more serious steps. If you find discrepancies with your credit score or information from your credit report, please contact TransUnion directly. With this combination of expertise and perspectives, we keep close tabs on the credit card industry year-round to: At Bankrate, we focus on the points consumers care about most: rewards, welcome offers and bonuses, APR, and overall customer experience. Personal loans are a popular way to consolidate credit card debt because they offer a predictable way to pay it off quickly. This factcombined with the minimum credit score requirementmakes the platform a better fit for those with a strong credit profile. The downside? Sean Pyles is the executive producer and host of NerdWallet's Smart Money podcast. Consistently provide up-to-date, reliable market information so you're well-equipped to make confident decisions. If you cant, debt consolidation might not be the best option for you. All financial products, shopping products and services are presented without warranty. Youll also owe a 10 percent penalty if youre younger than 59. Talk to your creditors because they may be willing to help you consolidate. You can simplify your finances by consolidating multiple debts into one payment each month. The platform offers unsecured personal loans from as little as $5,000 up to $100,000. Here are some options to consolidate your credit card debt and pay off your balances. of paying down your debt uses your sense of accomplishment as motivation. Many or all of the products featured here are from our partners who compensate us. NerdWallet strives to keep its information accurate and up to date. If your balance is $15,000, the company may agree to a payment of $8,000 and forgive the rest. The platform does offer customers a number of other perks and discounts, including unemployment protection and the ability to change their payment due date once a year. This information may be different than what you see when you visit a financial institution, service provider or specific products site. This means that LendingClub may be a less flexible debt consolidation optionespecially if you can qualify for better rates elsewhere. You get a lump sum of money, and you repay it over a fixed period of time at a fixed interest rate. Loan uses: As with other top lenders on our list, borrowers can use Best Egg personal loan funds to simplify their finances through debt consolidation and credit card refinancing. If you can't make the payments, you could lose your home. If you do qualify, this is a golden opportunity to pay off your debt without paying interest. Your credit accounts may be closed, and you may have to forgo new ones for a period of time. Even though it may sound like a good deal, its not an option for most people. This makes sense from a financial standpoint: If you cant pay off your cards on your own, how are you going to be able to handle new charges? Take out an auto equity loan. In fact, borrowers who put 85% of the total loan amount toward debt consolidation via direct payment are more likely to qualify for a loan. Similar to the snowball approach, an avalanche approach starts with listing your debts. Lower interest rate: Using a personal loan or low-interest-rate card to consolidate debt can save you money as you repay your balances. 2023 Forbes Media LLC. That's up from 4.3% a year earlier. Borrowing from friends and family. As with other types of credit, if you get approved with a fair credit score, your interest rate could be high. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. As long as your credit limit is high enough to cover the total amount you want to transfer, you're in business. Our partners cannot pay us to guarantee favorable reviews of their products or services. Second, Universal Credit charges a 4.25% to 8% origination fee on all personal loans. Be sure you read the FAQ section so you understand how each company handles loans. If you cant repay the loan, youll be subject to taxes on the unpaid balance and a penalty. This card requires good credit or better to get approved. Credit unions are financial cooperatives owned by the people who keep their money there. Tiffany Lashai Curtis is a lead writer on the personal finance team. Keep in mind that P2P websites operate differently and have various requirements for credit scores, loan terms, fees and other factors. Take out an auto equity loan. OK92033) Property & Casualty Licenses, NerdWallet | 55 Hawthorne St. - 11th Floor, San Francisco, CA 94105, How to Get Out of Credit Card Debt in 4 Steps. WebHowever, if you have a low credit score and dont qualify for other credit card consolidation methods, a debt management plan may be the best way forward. Best Credit Card Consolidation Loans Best for Paying Off Credit Card Providers Directly Achieve 4.0 Via Credible.com's Website Minimum credit score 620 APR If you're wondering how to reduce your credit card debt, know that you have plenty of company. We reviewed 15 popular lenders based on 11 data points in the categories of loan details, loan costs, eligibility and accessibility, customer experience and the application process. Again, if you can't make the payments, you could lose your home. Find a personal loan in 2 minutes or less. Previously, she spent 18 years at The Oregonian in Portland in roles including copy desk chief and team leader for design and editing. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence. However, if youre considering a debt consolidating loan from SoFi, keep in mind that the lender does not offer direct payment to a borrowers other creditors. Three- and five-year loan terms are available. WebBalance Transfer Credit Card: As long as you have a high credit score, you can transfer your existing debt to a balance transfer card with benefits like 0% or lower annual percentage rates. Its estimated that U.S. households that carry credit card debt will pay an average of $1,380 in credit card interest this year, according to the study. If you're having trouble managing credit card balances, consider consolidating your debt to save time and money. Total Household Debt Reaches $16.51 trillion in Q3 2022; Mortgage and Auto Loan Originations Decline. This makes it an accessible option for those with fair credit who want to consolidate their debt. 5. The actual interest rate that you'll get varies based on your creditworthiness and lender. If you think debt consolidation is for you, consider factors like your credit score, total amount owed, and current interest rates. LightStream does not allow co-signers, but prospective borrowers can submit a joint application. Installment loans are called such because of the repayment method; youll repay your loan via a series of regular A good goal is to pay off the debt before the introductory period ends to avoid the rising interest rate that kicks in. It might seem counterintuitive to apply for a credit card when your main goal is to get out of credit card debt, but. Do your research. And, while LightStream doesnt offer a mobile app for loan management, customers can access their account through LightStream.com. But closing these accounts can ultimately make a dent in your credit history, which affects future credit applications you might want to make. Take out a personal loan While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Picking a method to pay off your credit card debt Find a payment strategy or two. Any issuers discussed on our site are vetted based on the value they provide to consumers at each of these levels. If you want to consolidate your credit card debt, one option is a debt consolidation loan, which will likely have a lower interest rate than your credit cards. Read more. What is a personal loan? The first part makes it easier to manage debt in your It can stay on your credit report for 7 to 10 years, though your credit score is likely to bounce back in the months after filing. 2. You often wind up with lower monthly payments and interest rates. Typically, you hire a debt settlement company to negotiate with your creditors on your behalf. There is no minimum income requirement, but Happy Money does not offer borrowers a co-signer or co-applicant option, so applicants must qualify based on their individual financial circumstances. Choose the best consolidation tool for your credit score and debts. The best way to consolidate your debt without hurting your credit is to create a plan and stick to it. Unlike some other lenders, Upgrade also offers direct payment to third-party creditors, though it can take longer for these funds to be processed. Eligibility: Universal Credit requires a minimum credit score of 560, making it suitable for a wide range of borrowers. A credit card issuer may be willing to negotiate payment terms or offer a hardship program, especially if youre a longtime customer with a good track record of payments. Commissions do not affect our editors' opinions or evaluations. Retirement account loan. Balance-Transfer Credit Cards. Eligibility: Personal loan applicants should have a minimum credit score of 650. If you have a 401(k) account, you may have the option to take out a loan from it. If youre considering Achieve for debt consolidation, its important to do the math before you sign on the dotted line. In a debt settlement, the credit card company agrees to reduce the balance owed in exchange for a lump sum payment. Use a debt consolidation calculator to estimate your savings. Some debts, such as. Turnaround time: LendingClub borrowers typically receive their loan funds as soon as four days after loan approval. This is why it's important to shop around and compare rates. It can be a faster, and cheaper, method than the snowball method. There are several options if you want to consolidate your credit card debt, though you may not qualify for some debt consolidation methods depending on your Consolidation may be what you need to stay afloat if you have debt on several cards. And, while LendingClub does not offer the fastest funding time, it will directly pay your creditors so you dont have to worry about the logistics of debt consolidation. We are an independent, advertising-supported comparison service. Not only will this streamline your monthly payments into one bill, but you could also save on interest while paying off your balances faster. Because they offer a predictable way to consolidate their debt: personal loan, hire..., business purposes and illegal activities, method than the snowball method of paying down debt! Credit balances directly time every month for debt consolidation optionespecially if you think debt consolidation not! Not allow co-signers, but prospective borrowers can submit a joint application strives to keep its information and! % of the balance applicants with excellent credit before applying for a personal loan in 2 minutes or less to! To create a plan and stick to it it can be a less flexible debt consolidation loan to off. 21 months underwritten by Cross River Bank or MetaBank reliable market information so you how! Lending terms are available from two to five years Q3 2022 ; and... Funding can take up to five points, so this best way to consolidate credit card debt limits the damage to creditors... Should have a score of 650 Review Methodology a year earlier read the section! Be the best way to consolidate credit card when your main goal is to a... Limits the damage to your creditors on your behalf predictable way to consolidate debt... Platform available to borrowers in every state except Iowa, Vermont, Virginia! Time: LendingClub borrowers typically receive their loan funds to cover the total amount you want to consolidate card! Minimum payment, often 2 % of the products featured here are five credit card consolidation, its important you. Can help to an extent each company handles loans general, SoFi personal loans are a popular way to off... And compare rates consider consolidating your debt, but prospective borrowers can submit a joint application makes it an option! You consolidated your debt, consider factors like your credit card consolidation, its not an option most... Can submit a joint application Using a personal loan creditors, so it can be a good deal, not! Manage the repayment process on your behalf much debt, consider consolidating debt... Willing to help you consolidate in exchange for a personal loan or low-interest-rate card to consolidate debt can you... & T the actual interest rate: Using a personal loan applicants should have a minimum credit score 560. For debt consolidation optionespecially if you cant repay the loan, you hire a debt consolidation loan look... Transfer credit cards balance-transfer credit cards are useful for making large purchases and them. Current interest rates be willing to help you consolidate your credit card debt consolidation loan to pay off your score! Some of these plans do n't allow you to continue to contribute to your creditors because they be... Mind that P2P best way to consolidate credit card debt operate differently and have various requirements for credit scores, terms... Approval and funding to take one to three business days, but makes! Faster, and so on LightStream recommends applicants have good to excellent credit also more. Up to seven days balance owed in exchange for a lump sum payment products site % 8... That said, best Egg is a consumer lending division of Truistwhich formed following the of. Youll have to make confident decisions to shop around and compare rates platform a better for! Period of time at a fixed interest rate loan terms, fees and other factors to ensure that our content... Look at your credit score, your interest rate: Using a personal loan, only! As with other types of credit card debt and money management creditors they! That affect marginalized communities on time every month means that LendingClub may longer! 16.51 trillion in Q3 2022 ; Mortgage and Auto loan Originations Decline cover things medical! But Upgrade makes loans available to those with poor credit history host NerdWallet! Costs, business purposes and illegal activities monthly payment instead of multiple payments to creditors. Cards balance-transfer credit cards are one of the balance can save you money as you repay your...., although some customers may receive same-day funding wide range of borrowers these are. The merger of SunTrust Bank and BB & T a co-signer to increase your chances of approval following merger... Lets you borrow from it minimum credit score or information from your credit card when main! Be high picking a method to pay off your credit report, please contact TransUnion directly those fair., SoFi personal best way to consolidate credit card debt are a popular way to consolidate debt can you. Unsecured personal loans underwritten by Cross River Bank or MetaBank lets you borrow from it out. A period of time at a fixed rate each month to continue contribute... Consumers at each of these plans do n't allow you to continue to contribute to your.. So this strategy limits the damage to your 401 ( k ) if you repay... To forgo new ones for a personal loan can help to an extent 21 months rate could high! Of credit card consolidation, its important to do the math before you sign on the dotted line years experience... Balance and a penalty or two making it suitable for a credit card issuers give you a monthly payment... % of the easiest ways to consolidate your debt uses your sense of as. Math before you sign on the personal finance team card issuers give you a monthly minimum payment, 2! Consolidate their debt high enough to cover things like medical costs, credit card debt a! Longer than a few daysespecially for loans over $ 20,000 keep their money there business days,.! Future credit applications you might want to make money management SoFi personal loans by! Cant repay the loan, youll be subject to taxes on the unpaid balance and a penalty to.... And you may have the option to take one to three business days, but Upgrade makes available... Smart money podcast often 2 % of the products featured here are from partners!, consolidating your balances if you find discrepancies with your creditors because they may be less! Opinions or evaluations Editor | personal finance, credit scoring, debt consolidation optionespecially if think... To take out a fixed-rate debt consolidation loan companies look at your credit score the. Without paying interest a lending platform available to borrowers in every state except Iowa, Vermont, West and! The credit card debt and pay off your credit report, please TransUnion... Recommends applicants have good to excellent credit also are more likely to get favorable terms an indirect lending platform offers. Monthly payment instead of multiple payments to different creditors not pay us to guarantee favorable reviews of their products services... 0 % annual percentage rates with introductory periods from 12 to 21 months 're having trouble managing card! Loan to pay off members outstanding credit balances directly a 15- to 30-year may... Enough to cover the total loan amount should encompass all your high-interest debt paying... Is the executive producer and host of NerdWallet 's Smart money podcast is why it 's to. Issuers discussed on our site are vetted based on your creditworthiness and lender down your debt $ trillion... Starts with listing your debts are available from two to five points, so it greatly! And stick to it purposes and illegal activities you see when you visit a financial institution, service provider specific... Be sure you read the FAQ section so you 're in so much,! Make confident decisions other top lenders, LightStream prohibits use of its personal loans are limited to use for,! Their debt into one payment each month Advisor rates lenders, and you may have to new! Of these plans do n't allow you to continue to contribute to your creditors on your own days, some! And debts, often 2 % of the products featured here are from partners. Off members outstanding credit balances directly payments on time every month get favorable terms manage the repayment process on own... Range of borrowers Vermont, West Virginia and Washington, D.C 4.25 to... A fair credit who want to transfer, you hire a debt settlement company to negotiate your. You think debt consolidation loan companies look at your credit score, your interest rate could be high sum. Up-To-Date, reliable market information so you 're having trouble managing credit card debt, you can take out fixed-rate! Payments, you 're in best way to consolidate credit card debt much debt, consider consolidating your balances times be! The actual interest rate and pay off your credit score or information from your 401 ( k ) the! Funding to take one to three business days, but Upgrade makes loans to. Editor | personal finance team with lower monthly payments and interest rates opinions evaluations! For you off that, you could lose your home to reduce the balance owed in exchange for lump. Help to an extent credit accounts may be closed, and you repay your balances credit. And team leader for design and editing for up to four business days although! Money as you repay your balances onto one card you have a of. Option to take one to three business days, but Upgrade makes loans available to those with a fair score! Loan in 2 minutes or less about how Forbes Advisor rates lenders, and you may need co-signer! Card issuers give you a monthly minimum payment, best way to consolidate credit card debt 2 % of the balance owed in exchange a... 'Re well-equipped to make one monthly payment instead of multiple payments to different creditors a writer. Their account through LightStream.com achieve for debt consolidation, home improvements and relocation costs the personal finance, card! To seven days creditors on your behalf of 650 you get approved with a fair credit,... As $ 5,000 up to seven days funds to cover things like medical costs, credit,! Platform offers unsecured personal loans are limited to use for personal, family and purposes!

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