Credit card debt can be frustrating and feel impossible to pay off. Not to mention, it's also expensive: The average credit card interest rate is around 16%.
If you have credit card debt spread across multiple cards, one option to help you get rid of it faster is to consolidate the debt using a personal loan, which you can get from a major bank like Wells Fargo, online lender like SoFi or credit union.
The basic premise is that you use the loan to pay off your credit card balances, then concentrate on paying down the loan itself.
A debt consolidation loan offers a number of advantages, including a potentially lower interest rate. With good credit, you could get an annual rate of around 6%. And instead of chipping away at each of your credit card balances month by month, you'll only have to worry about a single monthly payment.
Plus, if you pay the loan off responsibly, it could help boost your credit score.
However, debt consolidation loans are not a one-size-fits-all solution. Like a mortgage or auto loan, you'll need to apply and be approved for the loan, and the interest rate you're offered will depend largely on your credit score. If you have poor credit, the interest rate could be similar to — or higher than — that of your credit cards.
The length of the loan can play a part as well. If you need more time to pay off your debt, a longer term loan could mean a higher interest rate.
You should also watch out for any fees, such as an origination fee, which could cancel out any savings you may get from consolidating your debt.
And remember, even if consolidating your debt makes sense for you, you're not off the hook to actually pay it back. You should still aim to pay the loan on time and in full. But if you're struggling to manage your credit card debt, consolidating it could be a good place to start.
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