Should i consolidate my credit cards

You will likely need good or excellent credit or higher to qualify. Get a fixed-rate debt consolidation loan : Use the money from the loan to pay off your debt, then pay back the loan in installments over a set term.

You can qualify for a loan if you have bad or fair credit or below , but borrowers with higher scores will likely qualify for the lowest rates. Two additional ways to consolidate debt are taking out a home equity loan or k loan.

However, these two options involve risk — to your home or your retirement. In any case, the best option for you depends on your credit score and profile, as well as your debt-to-income ratio. Use the calculator below to see whether or not it makes sense for you to consolidate. Success with a consolidation strategy requires the following:. Your cash flow consistently covers payments toward your debt. If you choose a consolidation loan, you can pay it off within 5 years.

You always make your payments on time, so your credit is good. For many people, consolidation reveals a light at the end of the tunnel. If you take a loan with a three-year term, you know it will be paid off in three years — assuming you make your payments on time and manage your spending.

Readers also ask. It may take three to five years to repay your debt. Debt management plans roll several debts into one monthly payment at a reduced interest rate. You can find a debt management plan through a nonprofit credit counseling agency. Debt consolidation rolls multiple debts, like high-interest credit cards or loans, into a single payment.

This would reduce interest costs, lower your monthly payment or help you pay off debt faster. Your credit score may temporarily dip when a lender or card issuer does a hard credit inquiry. But if you pay on time and stay out of debt in the future, the overall effect could be positive. Consolidate with a personal loan. Tap home equity. Consider k savings. Start a debt management plan. Balance transfer card. Credit card consolidation loan.

Home equity loan or line of credit. No impact on your credit score. It can reduce your retirement fund. Debt management plan. Fixed monthly payments. May cut your interest rate by half. Sign up to link and track everything from cards to mortgages in one place. Get started.

Frequently asked questions What is debt consolidation? Should I consolidate debt? How will consolidating debt affect my credit? On a similar note Typically, here's how these companies work: Instead of getting a new loan to pay off your credit cards, the debt management company tries to convince the credit card companies to reduce your interest rates or otherwise lower your monthly payments.

Each month, you make a single payment to the debt management firm, and it distributes a portion of your payment to each of your creditors. Usually, it keeps a percentage—or sometimes all—of your payment to cover its fees. Scammer companies also sometimes advise debtors to default on their credit card payments and instead pay them. After taking their monthly fee, they put the rest of your payment into an account to accumulate a lump sum large enough to offer the credit card company.

In the meantime, your credit score gets worse because you've stopped making payments with no guarantee of actually settling the debt. Defaulting on the debt will likely lead to debt collection activities or a lawsuit against you. And, some major credit card companies refuse to work with debt settlement agencies.

Hundreds of fraudulent debt management companies exist, and it can be very easy to get pulled in by a debt settlement scam. While some legitimate credit counseling agencies see below provide debt management services for a low fee, many scammer companies charge huge fees and do little on your behalf.

Even if a debt management company does try to help you, you'll have to pay a lot for services that you could do yourself or would be better off paying to a lawyer or legitimate credit counseling company.

It's best to avoid for-profit debt management companies altogether. If you can't afford to pay off your credit cards, consider other alternatives, like settling them on your own or with the help of a legitimate credit counseling agency or lawyer, or filing for bankruptcy. By negotiating, you might be able to get a discount on the total debt owed, arrange for more favorable payment terms like a reduced interest rate, a lower minimum payment, or the removal of late penalties or other fees , or get the creditor to remove negative information from your credit report.

If you need help negotiating with creditors or debt collectors , consider talking to an accredited, nonprofit credit counseling agency or a reputable attorney rather than hiring a for-profit debt management service. With a bankruptcy, you might be able to eliminate your credit card debt. Legitimate credit counseling agencies offer financial help, including debt management plans and debt consolidation advice, for free or at a minimal charge.

These agencies also provide credit counseling, budgeting guidance, and debt management advice at no or low cost. To find a legitimate credit counseling agency:. Different kinds of lawyers provide services to help people deal with their debts. Two of the most common services that lawyers offer are representing debtors in bankruptcy proceedings and negotiating with creditors to settle debts.

Be aware that if you settle a debt for less than you owe, you might face a tax liability. Whether you should try to eliminate your debts through bankruptcy depends on your circumstances.

If you want to learn more about filing for bankruptcy, talk to a bankruptcy lawyer. To find out more about settling your debts, speak to a debt settlement attorney. If you need help deciding whether debt consolidation, negotiation, or bankruptcy is right for you, consider consulting with both a debt settlement lawyer and a bankruptcy lawyer to get different perspectives and learn about all available options. Many bankruptcy attorneys and debt relief attorneys offer free consultations and will quote you a fee after evaluating your circumstances.

The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site. The attorney listings on this site are paid attorney advertising. In some states, the information on this website may be considered a lawyer referral service.