5 Ways to Consolidate Credit Card Debt

Consolidating your credit card debt may be a good idea if the new debt has a lower APR than your credit cards.

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Credit card debt consolidation is a strategy that takes multiple credit card balances and combines them into one monthly payment.

is ideal if the new debt has a lower annual percentage rate than your credit cards. This can reduce interest costs, make your payments more manageable or shorten the payoff period.

The best way to consolidate will depend on how much debt you have, your credit score and other factors.

Here are the five most effective ways to pay off credit card debt:

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Also called credit card refinancing, this option transfers credit card debt to a credit card that charges no interest for a promotional period, often 12 to 18 months. You’ll need good to excellent credit (690 or higher on the FICO scale) to qualify for most balance transfer cards.

A good balance transfer card will not charge an annual fee, but many issuers charge a one-time balance transfer fee of 3% to 5% of the amount transferred. Before you choose a card, calculate whether the interest you save over time will wipe out the cost of the fee.

Aim to pay your balance down completely before the 0% intro APR period is over. Any remaining balance after that time will have a regular credit card interest rate.

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You can use an unsecured personal loan from a credit union, bank or online lender to consolidate credit card or other types of debt. Ideally, the loan will give you a lower APR on your debt.

are not-for-profit lenders that may offer their members more flexible loan terms and lower rates than online lenders, especially for borrowers with fair or bad credit (689 or lower on the FICO scale). The maximum APR charged at federal credit unions is 18%.

Bank loans provide competitive APRs for good-credit borrowers, and benefits for existing bank customers may include larger loan amounts and rate discounts.

Most online lenders let you pre-qualify for a without affecting your credit score, though this feature is less common among banks and credit unions. Pre-qualifying gives you a preview of the rate, loan amount and term you may get once you formally apply.

Look for lenders that offer special features for debt consolidation. Some lenders, like , specialize in consolidating credit card debt. Others, like , will send loan funds directly to your creditors, simplifying the process.

Not sure if a personal loan is the right choice? Use our debt consolidation calculator to enter all of your debts in one place, see typical rates from lenders and calculate savings.

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If you’re a homeowner, you may be able to take out a loan or line of credit on the equity in your home and use it to pay off your credit cards or other debts.

A is a lump-sum loan with a fixed interest rate, while a line of credit works like a credit card with a variable interest rate.

A HELOC often requires interest-only payments during the draw period, which is usually the first 10 years. That means you’ll need to pay more than the minimum payment due to reduce the principal and make a dent in your overall debt during that time.

Since the loans are secured by your house, you’re likely to get a lower rate than what you would find on a personal loan or balance transfer credit card. However, you can also lose your home if you don’t keep up with payments.

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If you have an employer-sponsored retirement account like a 401(k) plan, it’s not advisable to take a loan from it, since this can significantly impact your retirement.

Consider it only after you’ve ruled out balance transfer cards and other types of loans.

One benefit is this loan won’t show up on your credit report, so there’s no impact to your score. But the drawbacks are significant: If you can’t repay, you’ll owe a hefty penalty plus taxes on the unpaid balance, and you may be left struggling with more debt.

As well, 401(k) loans typically are due in five years, unless you lose your job or quit; then they’re due on tax day of the next year.

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roll several debts into one monthly payment at a reduced interest rate. It works best for those who are struggling to pay off credit card debt but don’t qualify for other options because of a low credit score.

Unlike some credit card consolidation options, debt management plans don’t affect your credit score. If your debt is more than 40% of your income and can’t be repaid within five years, then may be a better option.

You can find a debt management plan through a nonprofit .

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