If you’re struggling with debts on different credit cards, all with different payment dates, interest rates, and terms, it can be stressful. 

Consolidating credit card debt can be a great way to get your credit card balances all in one place, making it easier to keep track of them and pay them off. Merging your loans like this means that you only have one monthly payment to make, and it means you only have one interest rate to worry about. However, there are some consolidation loan pros and cons to consider as well.  

If you are thinking about credit card consolidation, a broker can help you look at how to combine credit card debts and work out what is right for you. 

How does credit card debt consolidation work? 

Consolidation for credit cards works in a similar way to other consolidation loans. Say you have three different credit cards with balances of £5,000, £12,000 and £3,000. You could get a new loan of £20,000 to pay off all of these credit cards. Then you only have one loan to make payments towards.  

Credit card consolidation will not reduce the amount that you owe. However, it can move all your credit card debts into one place, making it easier for you to keep on top of. This means one monthly payment date, one interest rate, and one balance to look at – often with a lower monthly payment due to lower interest rates. 

When you consolidate debt, you might find that you are eligible for a lower interest rate than when you took out the original credit cards. This could save you money in the long run. However, if your credit score has gone down since opening the credit card accounts, you might find that the interest rate is higher and costs you more. 

What are my options for credit card debt consolidations? 

There are a few different options that you can look at to help you consolidate credit card debt. Each of these has different advantages and disadvantages, so you should carefully consider which type of loan or plan is best for you before applying. If you are unsure how best to consolidate your credit card debt, you should find a financial advisor who can give you advice. Getting professional advice can help you make the best choice for your financial needs. 

Taking out a personal loan 

One of the most straightforward ways to consolidate credit card debt is with a personal loan. This means applying for a loan that is large enough to pay off all your credit cards. Getting a personal loan depends on your credit score and affordability, much like any other loan. Some of the advantages and disadvantages of personal loans for credit card consolidation are: 

Pros  Cons 
  • Personal loans often have a better repayment structure than credit cards, with the certainty of a fixed interest rate and a fixed monthly payment 
  • You might get a lower interest rate 
  • At the end of the term you won’t owe any money 

 

  • You may have to pay an upfront fee for the loan 
  • If your credit score has dropped, you might have to settle for a higher interest rate 

 Balance transfer credit card 

A balance transfer credit card is a credit card that lets you move over your debt from other cards. These typically offer a 0% interest rate for an introductory period, meaning that for a while after you move your balance, all your payments will help pay down the debt. Some of the benefits and downsides of balance transfer credit cards are: 

Pros  Cons 
  • An introductory 0% interest rate helps you pay down the balance faster 
  • Some cards offer additional rewards such as air miles  
  • Most balance transfer credit cards don’t charge annual usage fees 
  • Balance transfer credit cards are typically only available to people with high credit scores in the ‘good’ or ‘excellent’ bracket 
  • Most balance transfer cards have a transaction fee 
  • If you struggle with using credit cards responsibly, this could lead to more debt 

 Consider your home equity 

If you own a property, you might be able to take out a secured loan to release the equity you have in the house. In these loans, you put your home as collateral for the loan, letting you borrow larger amounts with relatively low interest rates. However, if you fail to make the repayments, your property could be seized. Some things to weigh up for secured loans are: 

Pros  Cons 
  • Secured loans usually have low interest rates 
  • Repayment periods can be long, helping increase affordability and reducing monthly payments 
  • These loans are sometimes an option even if you have a poor credit score 
  • Your property is used as security and could be taken in the instance where you don’t make your agreed repayments 
  • These products can come with Early Repayment Charges – should you wish to settle the outstanding amount before the end of the fixed rate period 

 

Debt management plan 

A debt management plan is an agreement you make with your creditors to help you pay off the credit card debts you have. These are usually only used when people are struggling to make significant payments to their debts. You can either negotiate this with your creditors directly, or you can look for a licensed debt management company to help you. If you use a debt management company, you will make one monthly payment to them, and they will split it between the various credit card debts you have. Some things to consider with debt management plans are: 

Pros  Cons 
  • A management plan can help if you are struggling to make your monthly payments 
  • You might be able to get payment breaks when needed 
  • Setting up a management plan directly with your credit card companies can be difficult 
  • If you use a debt management company, you will often have to pay fees when starting the plan and sometimes for each payment 
  • These arrangements will show on your credit report and might reduce your ability to secure credit in the future 

Is it a good idea to consolidate my credit card debt? 

Consolidating credit card debt can help if you are struggling to keep track of your repayments. However, there are some situations where it might not be ideal for you. 

If your credit cards are still in a 0% interest phase, consolidating the debt with a personal loan would mean that you start accruing interest, increasing what you have to pay. You might also find that your interest rate on a new loan is higher if your credit score has decreased. 

How can I prevent credit card debt in the future? 

Even if you know how to consolidate credit card bills, you will want to avoid future credit card debt. You should try to: 

  • Meet all the minimum repayment requirements 
  • Pay on time every month 
  • Make additional payments you can 
  • Budget carefully to avoid spending money that you cannot afford 
  • Find credit cards with low interest rates 

If you still struggle with credit card debt, it might be worth looking at other options, such as sticking to debit cards.