How does credit card consolidation work?
Credit card consolidation is where you use a loan to pay off all your lenders. For example, if you have credit cards with Natwest, Halifax, and American Express, a consolidation loan would cover everything you owe to these firms.
You would use the money to close these accounts one-by-one until you’ve cleared your credit card debt.
Instead of juggling repayments to these three lenders, you only have to focus on one. This would be the company that provided your consolidation loan.
Chances are, you’ll now be making smaller monthly repayments, dealing with better levels of interest, and a shorter repayment period.
A debt consolidation loan would work best if you were able to obtain a large enough loan to pay off all of your debts with the loan.
Can I consolidate my credit card debt with a balance transfer card for bad credit?
Many people consider paying off their credit card debts using a bad credit balance transfer card.
A balance transfer card allows people to pay off multiple credit card debts by transferring the debt onto a new card with lower interest. This type of debt solution is primarily used for credit card debt consolidation.
A balance transfer may not be the most suitable debt solution for you if:
- You are unlikely to be approved for a lower interest rate than the ones on the cards you currently have.
- You have a variety of debts that need to be consolidated - not just credit card debt. (i.e. personal loans, payday loans, store cards).
- You owe more than the average credit card balance.
In this case, you may find a debt consolidation loan is your best option to improve your financial situation.
Consolidate Your Debts
What is bad credit?
"Bad Credit" is a term used to describe a credit score that is below a desirable number.
Bad credit is typically a result of multiple factors:
- Missed or late payments to creditors.
- "Default Notices" on a credit file.
- A County Court Judgements (CCJ) is being issued on the credit file.
- Paying less than the contractual payment owed.
- Taking out too much credit at once.
- Having no history of managing credit.
People who have bad credit typically find it difficult to be accepted for new lines of credit. That being said, the Debt Consolidation Loan acceptance criteria of our panel of lenders. Here at Consolidation Express, our panel of lenders base loan acceptance on many factors
Is it worth taking out a credit card for bad credit to pay off credit card debt?
People often consider taking out another credit card for bad credit to repay their credit card debts. However, this is not always the best option for your finances.
Credit cards typically come with higher APRs than debt consolidation loans, especially for people who have a poor credit score. Hence, it is usually better for people’s financial future to take out a debt consolidation loan rather than another credit card.
Eligibility For Credit Card Debt Consolidation
- You must have multiple unsecured debts that you are struggling to pay.
- Consolidation loans typically have a repayment in excess of £75.
- You need to live in England, Wales, or Northern Ireland.
Eligibility Checker
Pros and cons of consolidating credit card debt
Like many other financial solutions, there are pros and cons to consolidating credit card debt:
Benefits
- Fewer payments to make each month – simplifying your finances.
- Borrowing at lower interest rates can save you money.
- You can repay your debts sooner.
- With only one lender to pay your finances are simpler to manage.
- A chance for you to improve your credit score.
Considerations
- Like any other loan, a consolidation loan may initially harm your credit score as it will increase the amount of debt that shows on your credit file.
- As the money gets paid directly into your bank account, it is your responsibility to ensure you pay off your credit card debt.
- If you continue to spend after clearing your credit card balances, this would put you in a worse position.
Can I consolidate credit cards without hurting my credit rating?
Initially, taking out a consolidation loan will probably damage your credit score as you’re taking out another line of credit. However, as you close your accounts – shrinking your credit utilization ratio – and start making payments on time, you should improve your credit score.
