Understand about consolidating credit card debt, is it worth it?

When the credit card debt starts to build up, it can be scary. Outstanding balances and compounding interest can quickly lead to debt problems that feel unmanageable. One possible solution is to consolidate the credit card debtbut is it a good idea?

First things first: If you're having debt problems, it's best to talk to a nonprofit debt counselor. For more information on how to get out of debt, check out our guide.

The consolidation of the credit card debt It can take two forms: an interest-free balance transfer credit card or a debt consolidation loan. To get a balance transfer card, you usually need to have a "good" credit score. If this option is of interest, check out our article breaking it down for you.

However, if you are more interested in a consolidation loan credit card debt Let's take a look at whether it's a good idea and the steps you need to take to get it.

When does debt consolidation make sense?
Consolidate the credit card debt with a debt consolidation loan means that you will then only have one lender to pay monthly. Your credit cards will be paid off with your loan, and you can focus on making one monthly payment.

Whether or not a debt consolidation loan is a good idea depends on your personal circumstances. Here are some scenarios where it might make sense:

Taking out the loan reduces the total amount you must pay. One thing to consider when taking out a debt consolidation loan is whether you will end up paying less than before. While your monthly payments may decrease as a result, you may find that due to the set-up costs and length of the loan, you actually end up paying more in the long run.

When you use it as an opportunity to cut your expenses and get back on track. You will only really feel the benefit of this type of loan if you cut up your credit cards after you have transferred the debt. If you don't, and you keep spending on them, then you could end up racking up even more. credit card debt.

When you can afford to keep the payments until the loan is repaid. If you take out a secured debt consolidation loan and don't keep up with your payments, you risk losing your car or home. So if you think something in the future may mean you won't be able to make your payments, like rising interest rates or a lack of job security, then a debt consolidation loan probably isn't for you. a good idea.

How can you consolidate your credit card debt?

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If you think it's a good idea to consolidate the credit card debt then the next step is to calculate what you owe. Basically, this is what your total outstanding debts are including interest. This will allow you to have a better understanding of your situation when you are comparing whether or not debt consolidation will save you money.

Then it's best to contact a non-profit debt counselor from somewhere like the debt charity StepChange or the Citizens Advice Bureau. They will be able to advise you if debt consolidation is a good idea or if there are other options available to you that may make more sense.

After that, if you still want to go ahead with a consolidation loan credit card debt, then you can use comparison sites or apply directly to one of the high street banks*. Be sure to check the interest rate and any fees on the loan to understand the total cost. Some comparison sites will also have an eligibility checker, which will perform a "soft search" for you, which won't affect your credit score.