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How Does Credit Card Debt Consolidation Work?

Although we help deal with a variety of unsecured debts, credit cards are probably one of the most common. Consequently, one of the most frequent questions we hear is ‘how does credit card debt consolidation work’?

To help answer this, we’ve detailed just about everything you need to know about how a loan can consolidate your credit cards:

How does consolidating credit cards work?

 

Credit card debt consolidation is when you take out a loan equal to – or just exceeds – the combined value of your accounts. Once approved, you use the money provided to repay your creditors one-by-one. You do this until you’re left with one lender to repay – the consolidation loan provider.

The process is often relatively straightforward, and you should be able to clear your credit cards within 24 hours of receiving the loan.

It’s important to check the terms and conditions of your credit cards and loans as you want to ensure you’re paying less interest or can clear your debts faster through the money provided.

Fortunately, as a consolidation loan broker it’s in our best interests to make sure you get the best deal possible. We’ll never recommend a loan which puts you in a worse financial position.

Consolidating credit card debt through balance transfer

Balance transfer is when a financial company will offer a zero per cent interest (or low-interest) introductory offer to consolidate your credit cards. In this case, you’re just moving the balances of credit cards onto one account.

While the offer is active, your rate of interest could be non-existent. As a result, this option can give you some much-needed breathing room. However, it can be very risky.

For example, if you don’t clear your debts within the introductory period, your rate of interest will increase. Furthermore, should you miss a payment, it’s common for the provider to increase the interest rate.

Consequently, if this option isn’t managed carefully, it can become very expensive.

I have bad credit, can I consolidate my credit cards?

With balance transfers, the best offers are usually reserved for those with good credit histories. Therefore, those with poor or bad credit may have difficulty acquiring one. However, it’s often much easier to get a consolidation loan with bad credit.

In our case, we believe a poor credit history shouldn’t get in the way of your application – especially as you’re trying to regain control of your finances. Therefore, we promise to consider all credit scores – no matter how bad.

What do I need to know about debt consolidation?

Although some solutions write off or reduce what you owe, this isn’t true in the case of debt consolidation. You’ll still have the same amount of money to repay but you’ll owe one lender instead of several.

This means you’ll only have one interest rate to manage and one monthly payment to keep. This should make your financial situation much easier to control and could leave you paying less every month.

Is credit card consolidation right for me?

To find out whether credit card debt consolidation is right for you, feel free to give one of our specialist debt advisors a ring. They deal with this subject every day and will be able to determine – in a matter of minutes – whether this option would benefit you.

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