A credit card consolidation loan is a type of personal loan where the borrower uses the loan to pay off balances on credit cards. Once the credit card balances are at zero, the borrower can make one payment to pay off the loan. This type of loan basically compiles all the credit card debt into a singular one.
The credit card consolidation loans are especially good for those who have credit card debt on multiple credit accounts. Not only you can just focus on a single debt and not worry about the rest, you can pay off your debt faster.
Assume your credit card debt it $10,000 and you get a credit card consolidation loan for that amount. You will pay off the loan in 12 payments and if the interest rate is low, you should pay about $450 or so every month. If you were to pay off your credit card debt the usual way, this can take more than 12 months especially if you are paying interest and have payments that are due.
Think of a credit card consolidation loan as a balance transfer but rather than transferring your balance to a new credit card, you get a loan. This can also benefit your overall credit score. Because you’re opening a new credit line and the payments are much easier on you, making every payment on time will give you access to a higher credit line.
Should I get a credit card consolidation loan or a personal loan?
A credit card consolidation loan can be seen as a personal loan. The main difference between the two is the lender is giving the loan to the borrower to pay off a credit card balance. On the other hand, personal loans have a wide use. The lenders generally don’t ask what the loan is for. As long as you meet the lender’s credit requirements, both loans can be taken easily.
Can I get a credit card consolidation loan with bad credit?
You absolutely can. Not only that but you can also boost your credit score by making monthly payments on time. In general, most lenders will grant $10,000 in credit card consolidation loans or other debt consolidation loans for an individual with a 500 to 580 credit score. The higher your credit card debt, the higher your credit score needs to be.
Does credit card consolidation loan affect credit score?
The credit card consolidations affect the credit score of the borrower just like any other loan. How it’s going to affect it comes down to how responsible you are with your payments. If you make your monthly payments on time, your credit score is going to increase. If you don’t make your monthly payments on time, your credit score will go down. So there isn’t any difference when it comes to credit card consolidation loans or any other debt consolidation loans in general.