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How a Credit Card Debt Loan Works

Generally, a credit consolidation loan is a secured loan, meaning you offer collateral, such as with a home equity loan. However, if you do not own a home or don’t have much equity in one, you can get a personal or unsecured loan. An unsecured credit debt consolidation loan is unsecured because you do not offer any assets as collateral. Unsecured loans generally have higher interest rates than secured loans and can be difficult to get if you are already have bad credit or problems with debt. Whether it is secured or unsecured, a credit card debt loan will have a lower interest rate than most of your credit cards, bringing down your total debt owed because you will owe less in interest.


How a Credit Card Consolidation Loan Works

A credit card consolidation loan works to save you money by consolidating your credit card debts into one loan that has a lower interest rate. Credit cards often come with high interest rates, making it hard to completely rid yourself of credit card debt because of the higher monthly payments. By lowering your interest rate with a credit card debt consolidation loan, the total amount of debt you owe decreases, allowing you to get out of debt more quickly.

How Credit Card Debt Relief Companies Work

Credit card debt relief companies can help you navigate the process of consolidating your credit debts, perhaps into a credit card consolidation loan, among other options. You’ll be able to talk to a certified debt counselor who will evaluate your unique situation and help you through the process. If you need a credit debt consolidation loan, the counselor may even be able help you find and negotiate the best credit consolidation loanfor you.

Debt Loan Rates

Often, credit cards come with high interest rates. These rates can be 15% or even higher. Depending on your credit score, you can expect a credit consolidation loan to have rates around 11 to 14 percent.

The reason rates can vary on credit card debt loans is due to credit score. If you have a very good credit score, (740-799), you can expect an interest rate of around 10.99% for a $35,000 credit debt consolidation loan. For a $25,000 credit card debt consolidation loan and good credit (670-739), you can expect an interest rate of around 13.99%.


Definition and Types of Debt to Consolidate Loan

A credit card consolidation loan enables borrowers to take out a loan and use it to pay off multiple individual loans. This means they will only have one consolidated loan that they need to pay monthly. It doesn’t mean debt elimination – but if negotiated properly, it can lead to lower interest rates, lower monthly payments, and a simplified debt-relief plan.

The interest rate on a new loan depends on your creditworthiness and ranges from 5% to 36%. This is quite a wide range, but that’s an even bigger motivation to work on your credit. If the new loan’s interest is lower than your existing one, it’ll save you money in the long term.

In addition to credit card debt consolidation, there are some other types of debt that can be managed through this program:

  • High-interest personal loans
  • Student loans
  • Payday loans
  • Income taxes
  • Medical expenses and hospital stay debts
  • Cell phone and utility bills
  • Court judgments

The overarching criteria is that loans or credit lines should not be secured by a home or otherwise collateralized.

Credit Card Consolidation: Pros and Cons

As with any debt relief solution, there are always positives and negatives for each option, including a credit card debt consolidation loan.

A credit card debt loan allows you to consolidate your various credit card payments into one monthly payment. Having a single payment can help relieve some of the stress brought on by financial distress. Also, a credit consolidation loan can also make it easier for you to figure out your budgeting by having to only worry about a single payment rather than say, five payments a month.

But most of all, a credit card debt consolidation loan can bring down your total debt owed. By lowering your interest rate, you can pay off your debts with less money. A credit card debt loan may even help you reach financial freedom faster.
Though your interest rate may be lowered by credit consolidation loan, it will not lower the principal amount you owe on each credit card as would happen with a debt negotiation or settlement.

There is also a small chance that you could negatively affect your credit score with a credit card debt loan. But this will only happen if you are delinquent in making payments on your consolidated loan.

Why You Should Trust Us

Not all debt relief companies are the same. It is important to choose the right company for you. Make sure to ask yourself two questions: First, what will it do for you and second, is it for real. Anything related to money attracts scammers and you should be weary of that.

A quick way to spot a disreputable debt settlement company is if it asks for any fees upfront, as the government has outlawed this. A company should only charge a fee after it has produced results.

Proven Results
Experienced and trusted credit card debt settlement negotiators.

Negotiating Power
We are trusted sources for negotiating a credit card debt consolidation loan. We have the experience to negotiate lower interest rates for you.

Our highly trained team of experts are there for you every step of the way.

Customized and Flexible Program.

You choose the credit savings plan that is right for you with control over your deposits and the account they are saved to. You won’t get charged any fees until you see results.

When You Might Need a Debt Consolidation Loan

There are many reasons why people choose to consolidate credit card debt. Some of the main reasons are to reduce overall interest charges and simplify their monthly payments. It sounds extremely promising. However, if you have wrong spending priorities and inconsistent income, you may not benefit from it as much.

Consolidation of credit debt loans works for you if:

  • Your bills (debt payments included) don’t exceed your income;
  • Your debt service is less than a half than your income;
  • Your credit score isn’t catastrophic and can qualify for a low-interest loan;
  • You can use your home as collateral for a secured loan;
  • You’ve cut back on your expenses and have a plan to maximize your money.

How to Get a Loan with a Low Credit Score

Of course, getting a credit card consolidation loan with bad credit isn’t ideal. You are unlikely to qualify for the lowest rates, which means consolidation loses some of its benefits. It doesn’t mean you shouldn’t take out a loan or at least try to explore this option. A consultation with a debt specialist should clear out this issue for you.

In the meantime, you can make certain moves that can potentially make you a more desirable candidate. Here are some recommendations if you’re planning to get a credit card consolidation loan with bad credit:

Check your credit report. You can access a free copy of each of your three credit reports once every 12 months. Look for mistakes in accounts, reported missed payments, and credit limits.

Lower your debt-to-income ratio. Perhaps you can’t consolidate your debts right away. Pay off small debts to shows lenders since it’s often a sign that you’re a borrower that wouldn’t miss payments.

Add a co-signer to the loan. With most credit card consolidation options, you’ll benefit from adding a co-signer with a long history of good credit. If their score exceeds your own, it may qualify you for a lower interest rate.

Shop around. Don’t rush into taking out a loan before making sure it’s the best option you have. Instead, pre-qualify and see estimated rates.

Tips to Get Rid of Debt Faster

Whether you decide to get a debt consolidation loan with very bad credit or explore other options, you should always have a plan for accomplishing your goal. It can be discouraging when you’re just starting your journey. But having a clear plan gives you much-needed structure and helps you stay on track with your payments.

Here are some other tips that should help you get through:

  • Make the most of every dollar and track your progress.
  • Consider automating your payments and using personal finance software.
  • Stick to the plan you’ve discussed with your counselor to keep the new repayment terms.
  • Pick up some side hustles.
  • Keep contributing to your savings accounts that you can borrow from (for situations like loss of income, emergencies, etc.)

Before you commit to any loan, make sure you’ve explored all options and found the best one for you personally. Trying to do that alone can be a tough job. So, instead of questioning your abilities to handle your debts, put your trust into one of the best credit card consolidation loan companies.

At Debt Quest USA, we will take over the task of getting favorable rates and terms. Meanwhile, you will have more free time to tackle the consolidated debt.



Alternative Debt Relief Options

Not everyone can qualify for a credit debt consolidation loan. Most lenders require a minimum credit score of 660 to qualify for a credit card debt consolidation loan. Otherwise your interest rate would be too high. However, there are some possible alternatives for you to consider.

  1. Transfer Your Balances: Rather than taking out a credit card debt loan, you could consider transferring your balances to a card with a lower interest rate or, even better, a 0% interest balance transfer card. By doing this, you are able to consolidate your credit debts into one payment and you also lower your interest rate, for example from 15% to 12%. If you are able to do a 0% interest balance transfer card, you will have a period of time that you are not required to pay any interest at all. During that time, your entire payment goes to reducing your balance. If you are able to make larger payments during that time, you can make an even bigger difference, allowing for a smaller amount to be charged interest, resulting in a smaller overall balance.
  2. Debt Settlement: If self-initiative payments, transferring your balances or obtaining a credit card consolidation loan is not an option for you, you can consider debt settlement. For this option, you would work with a trusted team like us, that would negotiate and settle your debts.

Learn more about debt settlement services!

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