If you have a large amount of credit card debt, especially if those debts carry high-interest rates, you may want to consider consolidating your debt. This can be done with either a personal loan or by obtaining a zero percent interest rate credit card.

Why Consolidate Debts

There are a number of reasons why you would want to consolidate what you owe, including easier payment plans, the potential to lower your total monthly payment amount and the ability to reduce your interest rates. Additionally, if you have credit cards that charge fees for having them open, consolidating your debts will get rid of these additional costs.

Many people find it easier to make a single payment to a creditor each month instead of having to remember to make several payments. If you tend to forget to make payments, a single monthly payment could help you avoid late fees. Additionally, many credit cards increase the interest rates that they charge the longer you have the card, so a new loan could give you a much lower interest rate, which can dramatically reduce what you have to pay to get out of debt.

Personal Loan Consolidation

One popular method of debt consolidation is to take out a personal loan. A personal loan can normally be obtained through a bank or a credit union, and they allow you to pay back what you owe over a period of time. Personal loans can be secured or unsecured, although most people prefer to obtain debt consolidation loans that don’t require them to put down collateral. If you’re having trouble making ends meet, the last thing you want to do is to worry about your home being repossessed if you can’t keep up with a personal loan.

When looking for a personal loan, you’ll want to consider the repayment duration, the interest rate you’ll receive and if there is an origination fee. Unsecured loans tend to have higher interest rates than secured loans, and this is especially true if you have less than stellar or bad credit. It’s important that between your interest rate and your origination fee that you don’t end up having to pay more to get out of debt in the long run.

Your repayment duration should also factor in your decision to take a personal loan from a particular lender. How long you have to pay back a loan will determine your monthly payments, and you need to be sure that you can make them without financial strain.

Credit Card Consolidation

Another option for unsecured debt consolidation is to look for a credit card that has a low or zero percent introductory interest rate. Depending on the credit line offered, you may be able to transfer most or all of what you owe onto the new credit card. This will give you the ability to still make one monthly payment, and you’ll also benefit from a reduced interest rate.

However, if you are considering this option, make sure that you select a card that allows for free balance transfers and doesn’t have an expensive yearly fee. If a card has a costly fee, you may be losing out on the savings you’re getting from a reduced interest rate.

If you opt to use a credit card to consolidate your debt, you’ll also want to ensure that your interest rate after your introductory offer expires isn’t higher than the interest rate you had before. If you can’t pay off your credit card before the regular interest rate kicks in, you may end up in a worse position if the card’s interest rate increases significantly.