How to Consolidate Your Credit Card Debt: 5 Simple Ways

Americans have a lot of credit card debt — $986 billion, to be precise.

According to a recent survey, 57% have missed at least one payment and nearly half are using credit cards to pay essential bills.

If you’re struggling to make multiple minimum payments each month, debt consolidation could solve your financial worries. Here’s how it works.

Are you eligible for debt consolidation?

We may be able to help. It’s easy and free to find out.

Here are your five best credit card debt consolidation options

If your debt is overwhelming, you need to take action. These five options will be your best bet.

  • Best for people with good credit: Debt consolidation loan or credit card consolidation loan
  • Best for people with smaller debt totals: Credit card balance transfer
  • Best for homeowners who’ve built up equity: Mortgage refinance, home equity loan, or HELOC
  • Best for people with at least $7,500 in unsecured debt: Debt settlement
  • Best for people who need to maintain their credit score: Debt management plan

Disclaimer: Some or all of the products featured in this article are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. All opinions are our own.

Best for people with good credit: Debt consolidation loan or credit card consolidation loan

Debt consolidation or credit card consolidation loans are types of personal loans. These new loans- ideally with lower interest rates than credit cards- combine different types of unsecured debts, including medical bills and credit cards.

These loans must be repaid in installments, usually every month. Most are unsecured, meaning the borrower does not have to put up collateral to qualify. Funds may also be available the next business day after the application is approved.

Pro tip: The average credit card interest rate is an annual percentage rate of 16.45%, but getting a much lower interest rate on a consolidation loan is possible. For borrowers with good credit (690+ FICO score), the interest rate may be in the single digits (9% or less). However, borrowers with a lower credit score may not qualify for an interest rate lower than their credit cards.

Eligibility for a consolidation loan depends on several factors, including debt-to-income ratio (DTI), income, and credit score. Before applying for a loan, trying to prequalify is a good idea. This won’t affect your credit score, but it can give you an idea of the loan amount, interest rate, and terms you could get. You can use this information to calculate whether debt consolidation is worthwhile.

A debt consolidation loan should be large enough to cover all of your monthly debt payments. However, the new monthly payment will still need to be manageable for you to avoid future debt. Remember that some lenders charge additional fees, such as an origination fee or a prepayment penalty.

Pro tip: Extra costs can add up if you’re not careful, so calculate them into the total loan cost before accepting any loan offer. If your monthly loan payment on the new loan is more than you afford, this won’t solve your underlying financial issues.

READ MORE: How debt consolidation works

Top personal loans

Many online lenders and brick-and-mortar banks offer loans to consolidate credit cards and other consumer debts. Each lender has its eligibility requirements, rates, and terms. Some lenders even offer consolidation loans for borrowers with bad credit. Repayment terms are often flexible, but not always.

Before applying for a loan, shop around to find the best one for you. If your credit is less than ideal, check with your local banks or credit unions to see what they offer.


Upstart is an online lender that works with traditional financial institutions, such as credit unions and banks, to provide loans. Unlike other lenders, Upstart uses nontraditional factors in determining a borrower’s eligibility, such as their current income and education level.

A debt or credit card consolidation loan through Upstart requires a few things, including:

  • 6+ months of verifiable employment with a steady income
  • 18+ years old
  • Active banking account with a US-based financial institution
  • 300+ credit score (670+ for competitive rates)

Here’s a standard loan through Upstart:

  • Loan terms: 3 to 5 years
  • Borrowing amounts: $1,000 to $50,000
  • Fixed-rate interest: 5.40% to 35.99%
  • Prepayment penalties: None

Once approved, Upstart typically disburses the funds on the next business day.


Upgrade’s personal loans range from $1,000 to $50,000 and can be funded as soon as the next business day. Upgrade offers is available to borrowers in all states except Iowa, West Virginia and Washington, D.C.

Upgrade takes many factors into account when considering loan eligibility, such as your credit score, credit usage and history. In addition, you’ll have to pay an origination fee. However, the low credit score requirement can make it an ideal debt consolidation option.

A personal loan through Upgrade requires:

  • U.S. residency or a valid visa
  • A minimum credit score of 560
  • 18+ years old (19 years old in Alabama and certain other states)
  • A verifiable bank account
  • A valid email address.
  • Loan terms: 24 to 84 months
  • Borrowing amounts: $1,000 to $50,000. Georgia borrowers must borrow a minimum of $3,005. Massachusetts borrowers must borrow a minimum of $6,400.
  • Fixed-rate interest: 8.49% to 35.97%
  • Prepayment penalties: None

All Upgrade personal loans have a 1.85% to 8% origination fee, which is deducted from the loan proceeds. The lowest rates require autopay and paying off a portion of existing debt directly.


SoFi is an online lender that offers different financial products, including debt consolidation loans, student loan refinancing, lines of credit, and traditional banking services. To get a loan through SoFi, you’ll need to meet the minimum requirements:

  • 650 to 680 credit score
  • Steady source of income
  • U.S. residence
  • 18 years or older
  • Low debt-to-income ratio

Here’s a standard loan through SoFi:

  • Loan terms: 3 to 7 years
  • Borrowing amounts: $5,000 to $100,000
  • Fixed-rate interest: 6.99% to 22.23%
  • Penalties: No origination, late, or prepayment fees

Best for people with smaller total debts: Credit card balance transfer

Some credit card companies offer a promotion allowing users to transfer balances from other credit cards. For a small fee (usually 3% to 5% of the total debt transferred) you can combine all of your debts onto one card with one monthly payment.

Pro tip: This only makes sense if you lower your interest rate. Some cards offer a set timeframe — or promotional period — when they charge no interest at all. Others will offer a low promotional rate. These can help you save quite a bit of money in interest.

Balance transfer credit cards are helpful when used correctly, but they’re not for everyone. You’ll typically need a good or excellent credit history (670+ FICO) to qualify. Before applying for one, here are a few things to look out for:

  • Fees: Some credit cards come with a balance transfer fee of around 2% or 3% of the amount transferred. Certain ones also have an annual fee. Try to go with one that doesn’t come with any additional fees.
  • Total debt: If you can’t pay off your balance before the introductory period ends, you could end up paying more in interest over the life of the loan.
  • Credit limit: The new card should have a credit limit that’s high enough to cover the existing debt. If it doesn’t, you may not be able to transfer enough to make the new card worthwhile.
  • Card issuer: Typically, credit card issuers won’t offer a balance transfer card to existing customers. Shop around for one that does offer it, ideally with 0% promotional APR.
  • Promotional period: Once the low-interest promotional period ends, the remaining balance will start accruing interest. A few will have deferred interest, which is based on the original balance but is delayed until the promotional period ends. At that point, it gets tacked on to the account. Try to pay off the balance in full before this happens to avoid any interest payments.
  • Funds availability: The funds are typically available upon approval, which can be immediate or within a few business days. Some credit cards even include paper checks that you can use to pay your other bills.

Two balance transfer cards to consider are:

READ MORE: Balance transfer credit cards

Best for homeowners who have built equity: Mortgage refinance, home equity loan, or HELOC

Mortgage refinances, home equity loans, or home equity lines of credit (HELOC) allow people with equity in their homes to borrow from themselves at an interest rate significantly less than most installment loans would charge.

  • Mortgage refinance: Refinancing a mortgage lets the homeowner get a new mortgage loan to replace the original one, or they can take out a second mortgage loan. This is often done to reduce the current interest rate and lower the monthly mortgage payments. But it can also be done to consolidate or pay off other debts. Refinancing is usually best for those with great credit, stable income, and equity in the home. Note that a second mortgage will leave you with two monthly payments: your current mortgage and the new loan.
  • Home equity loan: This is a type of loan that lets the homeowner borrow money against the equity in their home. The money can then be used for nearly anything, from home renovations to debt consolidation. These loans usually have a fixed interest rate and come with monthly payments.
  • HELOC: A HELOC also uses home equity, but the limit is based on the debt-to-income ratio and credit score. These often have variable interest rates. They also have a set draw period where the borrower can use the available money as needed. Once the draw period ends, the borrower must then start making payments until the balance reaches zero.

Defaulting on payments could put you at risk of foreclosure, so keep this in mind. Also, mortgage loan rates are currently high. For example, the national average for a 30-year fixed refinance loan is more than 7% APR. The higher the APR, the higher the cost of the loan.

Pro tip: A complete mortgage refinance will not be a good choice if you managed to lock in a low mortgage rate. For years, 30-year mortgage rates were below 3%. If you have a low rate, you will want to consider a second mortgage or a different loan option. Otherwise, a cash-out refinance could be extremely expensive, tacking on tens of thousands of dollars to your home loan over the years.

Best for people with more than $7,500 in unsecured debt: Debt settlement

Debt settlement is a way to reduce debts to a lower amount than originally owed. A for-profit debt settlement company usually handles the process.

With debt settlement, the company will contact any creditors and try to negotiate with them. As they do this, the borrower may be asked to stop making payments on the accounts. Instead, they will begin making monthly payments into a secure account. Once they’ve paid the agreed-upon amount, the company will then use that money to pay off the creditors.

The entire process takes two to four years on average. When successful, the borrower can reduce what they owe by an average of 30% after fees.

Debt settlement does come with some downsides, though, including:

  • No guarantee of success since creditors are not required to reduce the amount owed
  • Fees — usually 15% to 25% of the enrolled debt
  • A damaged credit score due to late or missed payments
  • Late fees and interest can add up over time
  • The amount of forgiven debt may be taxable as income, though if you can prove insolvency you won’t have to pay

But there are several benefits, including:

  • You’ll get out of debt while paying less than the full amount you owe
  • On average, debt settlement saves consumers $2.64 for every $1 in fees paid
  • Your credit score will rebound as soon as your debts are noted on your credit report as “settled”
  • You could start to see settlements in as little as four to six months

READ MORE: How debt settlement works

Best for people who need to maintain their credit score: Credit counseling

Another way to get a handle on high-interest credit card debt is with a debt management plan (DMP). This repayment plan usually lasts 3 to 5 years and is created and managed by a nonprofit credit counseling agency. By the end of the plan, any enrolled debts should be repaid.

If you decide to work with an agency, a credit counselor will assess your finances and help you determine the best option. If they determine a DMP is the best solution, they will negotiate with your creditors to help reduce your interest rate, waive late fees, and lower monthly payments.

Upon starting the DMP, you will make one monthly payment to the agency, which will then split the money and pay the creditors. This essentially consolidates the debt and makes it easier to manage payments. They customarily only work with credit card debt, so these won’t be much of a help if you need help with unsecured personal loans or medical bills.

DMPs usually come with a one-time enrollment fee. They also tend to have a $20 to $75 monthly service or account management fee. While enrolled, you typically will not have access to any credit cards, except one for emergencies.

READ MORE: Debt management vs. debt settlement

What are the differences between credit counseling and credit repair? Watch this video to learn more.

Benefits of debt consolidation

Before consolidating credit card debt, it’s good to know the benefits of doing so. These include:

  • Simplify monthly payments: Combining multiple accounts into one makes it easier to keep track of payment due dates. This can help prevent late or missed payments, which can cut down on late fees.
  • Save money on interest: If you have a good credit score and qualify for a low-interest option, you could reduce your interest rate. This could save you money in interest charges, as well as reduce your monthly payments. Plus, the less you pay in interest, the more you can put toward the principal balance to pay down the debt.
  • Improve your credit score: Payment activity, credit utilization, and credit mix all play a role in how your credit score is calculated. The more on-time payments and the lower the credit utilization, the more your score could potentially improve. Taking out a new credit card or loan to consolidate debt could also add to your credit mix.

READ MORE: How does debt consolidation affect your credit score?

Signs you need to consolidate debt

Here are a few signs that credit card consolidation is the best solution for you:

  • The credit card interest rates are much higher than what you could get with a debt consolidation loan or balance transfer card.
  • You’re only making the minimum monthly payments or are struggling to make payments at all.
  • Most or all of your credit cards are maxed out.
  • Debt collectors are calling.
  • You find yourself looking into new credit cards to pay off old ones.
  • Your credit score is falling due to missed or late credit card payments and high credit utilization ratio.
  • Other options, such as a debt management plan, seem like the best way to pay off the debt.

READ MORE: How to pay off $10,000 in credit card debt

Pros and cons of debt consolidation

Debt consolidation works for more than credit card debt. You can use it for any consumer debt. Here are some pros and cons.


  • Combine multiple credit card accounts into one simple monthly payment, usually with a lower interest rate
  • Potential for better credit utilization
  • A more manageable monthly payment means fewer late payments, which could help your credit score
  • The lower monthly minimum gives you some breathing room in your monthly budget
  • It could help you repay debts sooner


  • Borrowers with bad credit may end up with higher interest rates or not qualify for a new loan or balance transfer credit card
  • The new account will cause a temporary dip in your credit score
  • There could be prepayment penalties
  • There may be additional fees, such as an origination fee, balance transfer fee, or annual fee
  • Taking out a new loan could be risky if you end up missing payments
  • It won’t fix any underlying financial problems on its own

READ MORE: Can you consolidate debt if you’re unemployed?

The bottom line

Credit card consolidation could make it easier to manage monthly payments, lower interest rates, and get you debt-free sooner. There are several ways to go about this, including a debt consolidation loan, balance transfer card, mortgage refinance, debt management plan, or debt settlement.

Before committing to a strategy, consider your options. Each debt management solution comes with its own pros and cons, so what might work for one person might not work for you.


Does debt consolidation close credit cards?

Some — but not all — forms of debt relief will close credit cards. Debt consolidation loans, balance transfer credit cards and mortgage refinancing do not require your current credit card accounts to be closed. However, you may want to use them a couple of times a year to make small purchases in order to keep your accounts active. Debt settlement and Debt Management Plans typically require you to close your credit card accounts when they are paid off.

What’s the difference between credit card refinancing and consolidation?

Debt refinancing: Refinancing involves renegotiating the terms of your existing loan. It is usually used for large loans, like mortgages, car loans, or student loans. Refinancing can also replace a single existing loan with a new one with better terms. 
Credit card consolidation: Consolidation rolls several debts into a single new one. You use a new line of credit to pay off two or more existing debts. Refinancing is a one-to-one replacement. Debt consolidation replaces two or more debts with a single new credit line.

Why is credit card debt consolidation effective?

Credit card consolidation offers these advantages:

Lower costs: consolidation can lower your interest rate.  
Simpler finances: replace multiple bills with a single monthly payment. 
Easier budgeting: one consistent payment is easier to manage than many varying payments.
Lower credit utilization: replacing credit card debts with an installment loan can reduce credit utilization and improve your credit score.

Credit card debt consolidation won’t eliminate debts, but it can reduce interest costs and make debts easier to handle.

Scroll to Top