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How to Get a Credit Card Consolidation Loan

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Do you have a lot of credit card debt that you want to get paid off? Are you feeling like it’s a lot to keep track of? Well, a credit card consolidation loan may be able to help. You may be able to get a credit card consolidation loan at your preferred bank or credit union, but before you rush out the door to go apply, you may want to take some steps to help you prepare.

What Is a Consolidation Loan?

First up, it’s a good idea to make sure you know what this type of loan entails. After all, if you’re already in debt, taking out another loan may seem like a strange idea, right? Well, consolidation loans (also called debt consolidation loans) are loans that you take out to cover other debts. So you’re not really taking out additional money, per se — you’re getting the money to pay off all the other outstanding balances you have, leaving you with a much more convenient, solitary bill. Not only that, but you’ll potentially be reducing (maybe even eliminating, in some cases) the interest and fees you’d otherwise have faced with your other balances.

Keep in mind, however, that these loans aren’t typically free (more on that in a minute), so it’s important to read over the fine print before getting one. It’s also important to note that there are a few options to help you consolidate your credit card debt: You can take out a new loan, open a new credit card or enroll in a debt management plan. But today we’re going to focus on consolidation loans.

How Do I Consolidate All My Debt?

Each bank and credit union will have their own application and may have individual requirements not listed here, but this is generally what you’ll need to do if you want to get a  credit card consolidation loan.

  1. Review Your Credit: Just like with any other type of loan, your credit will be reviewed if you apply for a credit card consolidation loan. Because of this, it’s a good idea to know where yours currently stands so you have an idea of the types of loans you may qualify for. You can get free copies of your reports from each of the three main credit bureaus — Experian, Equifax and TransUnion — by visiting AnnualCreditReport.com. Once you get your reports, you’ll want to review each of them for accuracy. Any errors that are bringing down your scores could potentially harm your chances of getting the credit card debt consolidation help you need. If you find any problems, you can dispute these (this guide can help you understand how to do that). As you work to improve your scores, you can monitor your progress on Credit.com, where you can get two of your scores for free.
  2. Figure Out How Much You’d Need: Now that you’ve got a handle on where your credit stands, you’ll want to review the debts you are looking to pay off with the credit card consolidation loan. You’ll want to bring this information with you when you go to the bank or credit union to get the loan.
  3. Look at Interest Rates: While consolidating your debt to one payment may sound convenient, it will really only help your wallet if you’re getting a lower interest rate so you can pay your debt down faster. Otherwise, it probably just isn’t worth the hassle.
  4. Consider Any Fees: As we mentioned earlier, these loans aren’t free. If you have to pay fees to consolidate your credit card debt, you’ll want to factor that into your budget and repayment plan. Are these charges something you can afford or is it easier to just keep paying down your other debts instead?
  5. Verify the Lender You’re Considering: As you compare different lenders, it’s a good idea to review their qualifications (and user reviews) with companies like the Better Business Bureau or your local Attorney General’s office.
  6. Make Sure You Can Afford the Monthly Payment: Consolidation loans are installment loans, meaning you agree to pay the loan back by making a set monthly payment with a set interest rate over an also specified period of time. They provide a concrete end date to the debt, but they’re also less flexible than a credit card. If you had to, for instance, you could make just a minimum payment on a credit card. That’s why it’s important to carefully consider if the loan you’re being offered (and its monthly payment) is one you actually afford.
  7. Establish a Plan to Pay Off the Loan: Moving your debts to a single loan doesn’t mean they’re gone. You’ll still want to devise a plan to get the loan paid off in a timely manner. And remember, payment history is the biggest influencer of your credit scores, so it’s important to make those payments on time.

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