Credit Card Consolidation Personal Loan Basics

Debt consolidation and credit card consolidation are very similar. They even achieve the same result: a single, manageable payment rather than a monthly balancing act while attempting to make payments on time. But credit card consolidation and debt consolidation are not the same thing. Below, we’ll explain the differences.

Debt consolidation typically entails combining multiple types of debt into a single payment via a loan, such as with a personal loan. After you accept the loan, you will receive the entire amount in a single lump sum, also known as a one-time payment. You can use the funds to pay off each balance before making monthly payments on the loan rather than on multiple credit lines.

Credit card consolidation is limited to revolving credit card debt and allows you to lower your interest rates by obtaining a loan with better terms. You could, for example, choose a short-term loan with a lower interest rate or spread your payments over several years.

Keep in mind that even if the monthly payment is lower, longer-term loans will typically cost you more. This is because your lender won’t get their money back for a longer period of time, the interest rate on a longer-term loan is normally greater.

It’s also important to note that, in most situations, you’ll need to meet specific credit score requirements to qualify for a low-interest refinancing loan. Don’t be concerned if your score is low or nonexistent. Beginning today, you can take tiny measures to enhance your credit score.