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Ways To Consolidate Your Credit Card Debt

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Having multiple credit card debts can be stressful. That lingering thought at the back of your mind constantly reminding you there are debts to be paid every month can take the joy out of your day.

Debt consolidation becomes a necessary evil when multiple bills clutter your mailbox or inbox at the end of every billing period. Luckily it is possible to consolidate the debts from multiple credit cards.

Now that I have your undivided attention, let me tell you how!

Simply take a loan to pay off all the other credit card loans. What you are left with at the end of the day is a single loan.

And the great thing is… This single loan comes with a smaller interest rate compared to the interest you would otherwise be paying with the multiple credit card debts.

Read on to learn more about how you can consolidate your credit card debt.

Using a 0% interest balance transfer

This involves moving debt from one credit card to another that offers a lower interest rate. If you are able to transfer the debt on your credit cards to one offering 0% interest rates, there is a potential of saving a lot of money.

Often such credit cards are on a promotional offer for a limited time. This can be anywhere between 6 to 12 months. One of the main downsides to this is that since the other credit cards will be paid off, it is tempting to charge it again and find yourself in more debt.


  1. There is no interest charged during the introductory period.
  2. Takes away the pressure of paying different credit card debts.
  3. You can get better terms with the 0% balance transfer than with your other credit cards.


  1. It will cost you to transfer your debt to another credit card up to 3% of the debt
  2. You can only get a 0% credit card with a very good credit
  3. Since you will end up with paid credit cards, it can be tempting to charge it again

Taking out a personal loan through peer to peer lending

An easy route is to take a loan from an online peer to peer company such as Lending Club. Lenders from all over the country are connected with borrowers through an online platform.

You can get an affordable interest rate that remains the same throughout the period of payment. And the process is far much simpler than going to a financial institution such as a bank.


  1. Fixed interest rates throughout the payment period.
  2. Comes with low-interest rates.
  3. Simple and fast application process.


  1. Can affect your credit score.
  2. If you are applying with bad credit, the interest rates are higher.
  3. Your loan application may not be approved if you have bad credit.

Borrow a loan against a 401(k)

Most financial advisors will caution against consolidating debt using a 401(k) and it should only be done as a last resort. If, however, you have exhausted your options, it is still possible to clear high-interest credit card debts with a 401(k).

While rules may differ between different employers, typically, it is possible to borrow half the account balance. In most cases, the maximum limit is $50,000.


  1. Your credit card score will not be affected.
  2. A lower interest rate on the borrowed money as compared to marker lending rate.
  3. Interest is paid to your own account. Therefore, after all the repayments, the account value may actually increase.


  1. Slows down retirement savings
  2. Exposure to penalties and tax liabilities
  3. Money that would have otherwise grown in your 401k account is immediately reduced

Consolidating credit card debt using a home equity loan

This option involves taking a loan against the value of the equity on your home. Let’s say your current home is valued at $200,000. You’ve been paying the mortgage on it and what remains is $50,000. This means that over the period of time, you have $150,000 equity buildup on this house.

One of the main benefits of using your home equity to consolidate your debt is that there is less interest on the loan. However, there are some risks involved. Similar to the taking a 401(k), it is advisable to only use this as a last resort.


  1. Cheaper interest rates.
  2. Interest on home equity loans is tax-deductible.
  3. Less stress since you will only be paying a single loan.


  1. Risk of foreclosure is always there if you can’t pay your debt.
  2. It comes with long repayment periods of over 10 years.
  3. If the value of your home goes down, you may end up paying more money.

Consolidating loans using debt management programs

A point to note is that a debt management plan is actually not a loan. It, however, offers a great way to reduce unsecured loans through monthly payments. It involves a credit counselor working with your creditors. The monthly payments that you make will be used to settle the debts.

Two of the best-known credit counselors DMB Financial and National Debt Relief. These companies develop debt management plans by considering factors such as credit history, income level, stress levels, and monthly expenses to come up with the best monthly charge.


  1. You can consolidate your credit cards without a loan.
  2. You get a monthly budget suited to your individual situation.
  3. Paying a single monthly charge helps you remain loyal to paying your debts.


  1. In situations where you miss a payment, the agreement between the credit counseling agency and your creditors could be canceled.
  2. All your credit card accounts except for one are closed. This one is for emergency purposes only.
  3. Credit rating is affected.

Other less conventional methods

There are other methods that you could use to consolidate your credit card debts that are less conventional.

  • You can borrow money from family and friends and the good thing with this is that the repayment terms can be flexible. There are no harsh consequences in case you default and it will not affect your credit score. The interest rates can be very small or even no interest rates at all.
  • A very unpopular method is to sell your fixed asset. A fully paid off car qualifies as your fixed asset. Sell it and buy a cheaper one. The excess amount can go towards paying your debts.  You can also opt to lease a vehicle where you will essentially be paying for renting the vehicle. The rest of the proceeds from disposing of the car can be directed towards clearing your credit card debt.
  • When you have a good relationship with your employer, you can explain your situation and see if you can secure a loan from the company. You will then pay for the loan by having a certain agreed percentage of your salary deducted. Like borrowing from friends and family, interest rates are low to none.
  • An interesting way to pay off your credit card debts is to get used to paying cash for your things. Put away the credit cards and concentrate on paying your debts as you make purchases with hard cash. Without a refit line, you will be able to shrink your credit card debts over time.

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