Has anyone ever consolidated credit cards into a personal loan?

[CatStevens]

Hi! I am looking for advice on lowering my debt as it seems my credit cards keep rising up and up.  I pay off my min. balance very month but my balance only seems to go up and not down. I have 5 cards and I heard from a friend that I could get a personal loan to pay them off and then pay the loan. Curious if anyone has ever done this or it would something like this help me???? 

Any advice would be great. 

Thanks! 

[Lady1scorp · Accepted solution]

Yes. Your friend is correct, I have done this before with my credit union. You have to apply for a personal loan, they ask how much you would like or they obtain a copy of your credit report. Whatever is your total credit card balance, let's say $5000 they pay off $5000 and you make low monthly payments on the loan amount and in return your credit cards are at a $0 balance.

Remember this is subject to approval from your bank.

[Thintoast · Accepted solution]

If you're having trouble paying off credit cards, a debt consolidation personal loan is a great way to go. They're lower interest and you can't continue to add to the balance with new purchases. The reason your credit cards seem to be going up instead of down is that you continue to accrue interest on the balance. To make things simple, I'll just throw out some realistic but imaginary numbers...

Balance: $5000

Minimum payment: $150

Interest: 14.99%

Without doing actual math, the 14.99% interest is applied to the balance at a specific point in time each month. Let's say that interest is $50 based on the info above. Let's also say you make the minimum payment of $150 that month. You would expect your balance to be $4850, right? Well, without making ANY purchases, the balance on the next statement is $4900, because they'll apply the interest to your balance before sending you the next bill. Make a purchase of only $100 and you'll be right back where you started. In essence, you paid your balance down by $100 and then gave the credit card company $50 that month to maintain your debt.

If you're not familiar with this and really understand this, it's kind of an eye opener and can get a lot of people into financial trouble.

Credit consolidation loans (through a reputable financial institution and not one of those mailbox solicitors) can be a great way to reduce your debt. There's no surprise fees and you can't add debt on top of it. HOWEVER... and I can't stress this enough... the only REAL way to reduce your debt is to change your spending habits. The best way to do this? DESTROY YOUR CREDIT CARDS. The trap most people fall into is the one where they get a personal loan to pay off their cards, then go right back to using them because hey now there's plenty of room on the card for me to make this one purchase and then pay it off at the end of the month. One purchase turns into 2, then you take a vacation because your card can afford it. Purchases pile up VERY quickly, and the interest is VERY high. 6 months down the line you now have a personal loan payment and your credit cards are back to where they started.

[RackOps]

I've done it, and it works, but it only works if you get your spending under control at the same time. I used rocket loans, as they offered better terms than my bank.

[darrob10]

No, but I would like to, so my payment would be one freeing up my money

[darrob10]

No, but I would like to, so my payment would be one freeing up my money

[darlingnnikki121]

I consolidated about 30k in credit card debt into a personal loan through sofi, in a year i have paid off over 4k of it and improved my credit score by over 100 points. I feel like the number is coming down now instead of going up. The interest rate is at 11% which is lower then all of the cards the lowest rate was like 17 the highest 22. I feel like I made the right call it also made it easier for me to plan just one payment and be able to pay extra toward on thing instead of like 10. Hope this helps

[_brian]

Awesome to hear @darlingnnikki121!

How'd you learn about taking out that loan to make it easier? Any tips or things you'd change in the process you used? 

[Raptorfun]

I am doing this right now. My loan is 0% apr for the first 24 months which will help me in paying off my debt while not having to worry about interest.

I can tell you that paying off my 6 cards with a loan has boosted my score significantly. As for the payments I have a 60 day grace period before I need to start. We have consolidated my amounts into one easy affordable payment.

[Itsmrmt2u]

My credit is just fair, I just got a $15000 loan through prosper, I did the 3 year payment is a little high of $509 per month but still cheaper then what I was paying per month and my interest rate is 13% way lower then the credit cards I had
Check prosper.com it worked for me

[DaveT315]

A debt consolifdation loan from a reputable agency can help but not if you don't get your spending under constrol.  Credit counseling organizations are often nonprofits that offer people advice and help them create plans for paying off their debts and gaining control of their financial situation.  Look for a National Foundation for Credit Counseling (NFCC) accredited organization if you’re considering this route.   Some companies will want to charge you an up-front fee.  Do shop around for the best deal you can get.

Consolidation isn’t a cure-all. Before consolidating, you may want to figure out why you wound up with the debt. Then you can work on solving the cause of the problem.

If your credit is OK you might consider using a HELOC loan on your house to pay off credit card debt, then close the credi accounts you don't really need.  Free balance transfers between credit cards may also be an option, but only if tyou pay more than the minimum payment each month to reduce your debt. 

[bertandphil3]

Hi,
I was told the same thing so I consolidated all of my credit cards into a personal loan and it has freed up so much money and taken away a ton of stress. One payment every month for 5 years and they are paid off. The interest rate is lower then my CC’s and there is no pre-payment penalty if you want to make extra payments.
I hope this helps!!
Roberta

[bertandphil3]

I agree 100% with this statement, very well written, but would also like to add that when people read to “destroy” your credit cards after they are paid off is sometime misconstrued as close the accounts. All of the literature I have read states to keep the accounts open and that closing them will impact your credit score in a negative way. So by saying ”destroy” your credit card should mean just cut it up or lock it up and don’t use it again. I hope this helps.

[DaveT315]

For someone overwhelmed with credit card debt and seeking a consolidation loan, most likely the credit score has already been hit hard.  The problem with the onsolidation loan is that once the credit card debt has been converted to a personal loan, the credit cards get maxxed out all over again and the financial situation is even worse than before.  It is not always bad advice to close extra credit card accounts.

[Jrock11418]

I don’t mean to steal the thread but where did you get the 0% intersts for 24 months on the the loan? I mean I have heard of credit cards giving 0% rates on balance transfers for extended period of time, but this is a first loan for debt consolidation I have ever heard 0% interest for 24 months. And on $30,000. That’s excellent!!