A credit card debt consolidation calculator can help you see how much you can save by combining your debts into one loan. Find out where you can access one in this article, and also learn more about debt consolidation in general.
In this article:
Debt consolidation is where you combine multiple debts into just one. By doing this, you could benefit from a lower interest rate and monthly payment.
If you’re struggling to make your minimum repayments on different loans or credit cards, debt consolidation is one method you can use to make your debts more manageable.
Let’s say for example that you have a couple of credit cards at high rates of interest and a personal loan. By rolling them into one new loan with a competitive APR, you could lower your monthly payment, while paying off more of your debt, thanks to a lower interest rate. In theory, just having one debt payment to manage can make your life a little easier.
As you can see, there are positives to debt consolidation. However, there are also considerations too as outlined below:
1. How should you consolidate your debt?
There are a few options for consolidating your debt, including getting a debt consolidation loan (secured or unsecured), a Home Equity Line of Credit (HELOC) and applying for a balance transfer credit card.
A HELOC will be secured against your home. The same goes for a secured loan (if not your home, some other collateral such as your car).
The interest rates on these two financial products are likely to be lower than you’ll find via an unsecured loan or a credit card. The payoff though is risk. If you can’t make your repayments for some reason, you could risk losing your home or other secured assets.
An unsecured loan is most definitely a less risky option. So is a balance transfer to another credit card (if you only have credit card debt). There are plenty of 0% intro APR deals around but bear in mind the associated handling fees which are usually 3% of the balance transferred.
Fees usually apply with debt consolidation loans too, such as origination fees, early repayment fees or late payment fees.
2. Will you be able to avoid further debt?
By bundling your credit card debt into one debt consolidation loan, your credit card balances can effectively return to zero. Will you be able to resist the temptation to spend on those credit cards again?
The best way to make sure is to cut up your old credit cards, so you can’t make purchases on impulse and put a small amount of cash into a savings account regularly in case of emergencies.
When you have a lousy credit history, it can be tricky to get a loan with the terms you want, particularly when it comes to competitive interest rates. You may still be able to find a debt consolidation loan with a lower monthly payment than what you’re currently paying across numerous debts, but you could end up paying back more interest overall.
As a starting point, check out the following providers of debt consolidation loans for people with poor credit:
Avant app – if you have a fair or poor credit score (below 669), you may be able to consolidate your debt through an Avant loan. They could lend between $2,000 and $35,000, and their typical APR ranges from 9.95% to 35.99% depending on your creditworthiness.
One Main Financial – this provider offers personal loans for debt consolidation and will accept those with a poor credit history. With that said, you may need a credit score of at least 600 for a successful application.
To give you an idea of what your debt is actually costing you and how much you could save by consolidating, take a look at the following calculators online:
- Bankrate offers a loan consolidation calculator where you can calculate the savings of combining your credit cards. This tool shows you how you can create a nest egg by investing all or a portion of your savings.
- Bankrate also provides a debt consolidation calculator where you can calculate your debt and see if consolidation is right for you.
- Credit Karma has a handy debt repayment calculator in case you want to see how long it will take you to get rid of your credit card debt.
- Dave Ramsey’s debt payoff calculator is another tool you can use if you’re aiming for debt freedom.
Debt consolidation can help you reduce your monthly payments and (if you have good credit) it can lower the amount of interest on your debt too.
It’s not a strategy for everyone though. If you think you’ll be tempted into further borrowing by using existing lines of credit again, then it’s worth looking at other ways to get back in the driving seat with your debt. For example:
- Check out Dave Ramsey’s website to see if the debt snowball method could work for you.
- Ask a friend or family member for financial help.
- Try speaking to a credit counselor to get personalized advice on how to manage your debt. They may be able to help you arrange a reduced payment plan with your creditors. However, there are some scam debt relief organizations around. If you go down this route, do research them thoroughly and only choose one that’s non-profit, licensed in your state and is clear about its services and fees.
*The information in this article is based on opinions only; it does not constitute financial advice.