Debt Consolidation: Fix Your Credit Card Debt

Credit card debt consolidation is often a great way to get your debt problem more under control. While debt consolidation is not necessarily a magic pill that will solve all of your debt problems, it can lower your interest rates, lower your monthly payments, and ultimately result in you spending less to pay back your debt.

What is Debt Consolidation?

Debt consolidation involves taking out one new loan to pay off as much of your old debt as possible. This makes it more convenient as you have only one person to pay. It can also make paying your debt back much cheaper. Many times, credit cards have relatively high interest rates. These interest rates mean it can end up costing you much more than the value of your original purchase to pay the cards back over time. If you consolidate that debt into a new, lower interest loan, more of your monthly payment will go towards actually reducing your principal instead of towards paying high interest charges. That means the debt is paid off faster and for less.

Types of Debt Consolidation Loans

There are several different ways you can consolidate credit card debt, depending on your situation:

You can transfer the balances onto a new card that has a balance transfer offer available. Balance transfer offers are special deals that provide you with a low interest rate (as low as 0 percent) for a set period of time (usually six months to a year)
You can take out a personal loan from a bank or credit union. The interest on such loans is generally lower than the interest on credit cards
You can tap into your home equity with a second mortgage or home equity line of credit and use that money to pay off debt. This will often save you the most in interest since mortgage rates are typically very low compared to credit cards and even to personal loans. However, if you don't pay your bills, you are putting your house at risk for foreclosure.

Be aware that with each of the different options for debt consolidation loans, there may be fees. For example, credit card balance transfers usually charge you a fee equal to the percentage of the total balance transferred, while mortgages and personal loans may have origination fees and closing costs.

Getting Legal Help

If you are considering consolidating debt, consult with an experienced debt consolidation attorney who can guide you through the process and who can help you understand all of your options.

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