When managed carefully, credit cards can be a valuable financial tool. They allow their holders to build up credit, receive cashback or travel rewards, and even buy insurance or protection. But, on the other hand, things can quickly get out of hand when you carry a balance on multiple cards.
Fortunately, there are solutions to help you manage your debts and regain control of your financial situation. Debt consolidation is one of those options.

What is credit card debt consolidation?

Credit card debt consolidation is when you combine multiple credit card balances into a single monthly payment that ideally has a lower interest rate than what you are currently paying. (See also: Four Good Reasons To Consider Having More Than One Credit Card).

But consolidating your debt takes time. Many methods require an application process to see if you are approved first. And this can result in a thorough credit inquiry that can reduce your credit score by a few points.

How to consolidate credit card debt

When you are ready to consolidate your credit card debt, here are four options to help you regain control of your finances and achieve a better debt-free future.

1. consolidate credit card debt with a personal loan

An unsecured personal loan is the most common way to consolidate credit card debt. Depending on the amount of your credit card debt, you can apply for an unsecured loan to pay it off. However, this option may not be the best choice for people with bad credit. One of the most critical parts of debt consolidation is getting approved for a lower interest rate so that your hard-earned money goes directly to paying off your debt rather than interest charges.

2. consolidate credit card debt with home equity loan

If you are a homeowner, you can use the capital you have accumulated by paying off your mortgage loan to obtain a loan or a line of credit. Since you will be putting collateral in place to secure the loan, you will have a better chance of being approved for the loan.
It is important to consider the implications of putting up your home as collateral to pay off debt. Since a home equity loan is secured by your home, you risk losing your home in the event of default.

3. consolidate credit card debt with balance transfer cards

A credit card balance transfer is when you transfer the balances from all your credit cards to a new credit card at a lower interest rate. The main goal is to save on interest charges and pay off your debt as soon as possible.
In Canada, there are balance transfer credit cards that offer low fees and an interest-free introductory period for new customers. This means that you could save a lot of money if you can pay off all of your debts during the promotional period without interest. In general, credit card companies offer a six month interest-free period. However, some cards like MBNA True Line Mastercard have a full year interest-free period.

4. Debt management program

A debt management program is a good choice for those with significant credit card debt to consolidate. In addition, it is an excellent option for those interested in seeking professional help. You will work with a credit advisor who will review your entire financial situation and work with you to create a plan to address your challenges.
Thereafter, you will make your monthly payments to your advisor, and they will then distribute the money to the appropriate credit card company based on how much you owe them and the agreement you have reached.
However, make sure to do a background check about the credit advisor before working with them. Then, to protect your reputation, speak with your state’s attorney general or consumer protection agency.

In conclusion

Debt consolidation may be the answer to your financial woes, especially if you can get a lower interest rate.
However, before you consolidate your credit card debt, create a budget that will help you keep your spending in check as you pay down your debt. Remember, consolidating your debts won’t make them disappear. It’s only moved to give you a better chance of paying it back. So even after you consolidate your credit card debt, you will still need money to repay what you owe.