6 Best Consolidation Loans to Pay Off Credit Card Debt

6 Best Consolidation Loans to Pay Off Credit Card Debt
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Brittney Mayer
By: Brittney Mayer
Posted: October 17, 2017
BadCredit.org's popular "How-To" series is for those who seek to improve, rebuild or better understand their subprime credit rating.

Several years ago, I had a coworker, Autumn, who had a penchant for peacocks that bordered on an addiction. She had a collection of peacock-themed housewares and handbags, plush peacocks of all shapes and sizes, and a particularly pricey peacock-shaped coffee table in the middle of her parlor.

Unfortunately for Autumn, she fueled her peacock pride in the worst way possible: with her credit cards. At one point, she confided that she’d managed to spend more than $7,000 on peacock paraphernalia (and a few other imprudent purchases). Worse, over time, Autumn’s minimum monthly payments grew — and so did her interest fees.

To combat the problem, Autumn decided to consolidate her credit card debt using a personal loan with a lower rate. When done properly, debt consolidation can not only simplify your finances, but can also make it easier to reach debt freedom by reducing your interest rate, so more of your money goes to your principal, not your fees.

Long-Term Loans | Short-Term Loans | Considerations

Best Installment Loans for Consolidating Credit Card Debt

For credit card consolidation to be effective, the key is to obtain a lower interest rate on your consolidation loan than you are currently being charged on any of your credit card balances. In other words, if you can’t get a lower interest rate than you’re paying now, you won’t actually benefit from consolidation.

One of the easiest ways to find and compare multiple rate options is to use an online lending network, which connects borrowers with hundreds of lending partners from across the country. These providers, including our top-rated picks below, can save you hours of rate shopping, instead offering a single easy application to get quotes from a variety of lenders.

   
★★★★★

4.9

Overall Rating

Loan Amount Interest Rate Loan Term Loan Example
$1,000 to $10,000 5.99% - 35.99% 3 to 60 Months

See representative example

+See More Installment Loans

The actual interest rates you are offered will depend primarily on your credit score, with applicants with the best credit receiving the best rates. At the same time, other factors, such as the size and length of the loan, may also play a role. Most installment loan lenders will require that you have an active checking account and that you have a source of regular income.

You can use an online consolidation calculator to get an idea of how much you need to borrow, as well as the size and number of installments you need to make to repay your loan. Adjust all of the factors to determine the best combination of terms for your specific consolidation needs.

Best Short-Term Loans for Avoiding Late Card Payments

In some cases, you may not be able to obtain a consolidation loan with a lower interest rate, but you may still need help making a credit card payment to avoid late fees or credit damage. Short-term loans, often called cash advance loans, can be a helpful tool to stay on top of credit card payments you may otherwise miss — but only if you can repay the loan in full when it comes due.

Unlike installment loans, short-term cash advance loans will require that you repay your loan all at once, including the principal, finance charges, and any other applicable fees. Our expert-reviewed short-term loan options include online lending networks that make it easy to compare rates and terms so you can find the best fit for your needs.

  • Short-term loan of $100 to $1,000
  • Bad credit is no problem
  • Large network of lenders
  • Loan decision as fast as a few minutes; funding as soon as next business day
  • Required: Income of $1000+/month and at least 90 days on job
  • Click here for official site, terms, and details.
             
★★★★

4.0

Overall Rating

Loan Amount Interest Rate Loan Term Loan Example
$100 to $1,000 200% - 2,290% Varies

See representative example

  • Cash loans of $300 to $2,500
  • Receive cash in as little as 24 hours
  • Options for US, UK and Canadian applicants
  • Bad credit OK
  • Note: Payday loans are designed for short-term needs and may have high interest rates
  • Not available in: GA, PA, WA, WV
  • Click here for official site, terms, and details.
 
★★★

3.0

Overall Rating

Loan Amount Interest Rate Loan Term Loan Example
$300 to $2,500 Varies Varies

See representative example

+See More Short-Term Loans

It’s essential that you carefully consider your options before taking on a short-term cash advance loan. Due to the lump-sum repayment structure and high finance fees, many people find themselves unable to repay their loan as agreed. While you can often extend a short-term loan, you’ll be charged additional fees for the favor — and those fees can very quickly add up.

Even if you don’t need to consolidate your debt, a personal installment loan may still be a better alternative to potentially pricey short-term loans. Installment loans can often be obtained with shorter terms, as few as six months in some cases, and are not limited to consolidation; you can use a personal loan for just about anything.

Considerations for Selecting the Right Loan

In the seemingly endless sea of financing options, it can be difficult to know how to select the right loan for your individual needs. What type of loan should you get? What terms should you pick?

Thankfully, most of the answers you need to know to determine the best loan for your situation can be answered by examining two simple factors: how much debt you need to repay, and how long you need to repay it.

The Amount of Debt You Want to Pay Off

For many people, the amount of debt you intend to pay off with your loan will be the deciding factor in what type of loan to take out. For instance, the repayment structure of short-term loans is designed for smaller-sized loans, and amounts won’t typically exceed $2,500.

Installment loans, on the other hand, lend themselves better to larger loan sizes, and many lenders will offer loan amounts of $5,000 or more. In fact, PersonalLoans.com, one of our expert picks, provides installment loans of up to $35,000 to qualified borrowers. That said, installment loans will often have minimum loan sizes, requiring loans to be at least $500 or larger.

So, basically, if you only need a few hundred dollars, you may be stuck with a short-term loan. At the same time, if you need a loan larger than $2,500, an installment loan is likely your only option. For anything in between, you may need to move on to the next factor to decide: loan length.

How Long You Need to Repay Your Debt

Perhaps the easiest way to decide which type of loan to take on is to determine how long you need to repay your loan — which also determines the manner in which you repay it.

Chart Comparing Two Main Loan Types

As the name implies, short-term loans are just that: short. The average short-term loan length will range from several days to a few months, but will rarely extend beyond six months. You’ll also repay the loan with a single lump-sum payment on your loan’s due date.

Installment loans are actually designed to be long-term loans, repaid over time with multiple, smaller payments. The typical installment loan will last several years, with personal installment loans often extending up to 72 months and generally lasting at least three months.

Find Credit Card Debt Relief with a Personal Loan

It’s a simple fact of life that the more complicated a process becomes, the more room for error there is in the execution. When you’re trying to keep track of multiple debts, spread across several credit cards, it can be all too easy to miss a payment or forget a due date — which can have big consequences.

With the right loan, credit card consolidation can offer relief from high interest rates and convoluted finances. Consolidation loans can simplify your debts, consolidating them into a single loan, while also lowering your interest rates (and, potentially, your monthly payments).

Of course, consolidation is only truly effective if you change your poor spending habits. In Autumn’s case, for example, consolidation helped her pay off all of her credit cards and build a more streamlined budget. She was able to get her peacock-inspired purchases under control, focusing on paying down her consolidation loan rather than adding to her collection.