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Best Personal Loans For Credit Card Consolidation
If you’re like many Americans, you’ve got several credit cards in your wallet, at least a few of which have outstanding balances. And while carrying a balance on your credit cards can help you build a reputation as a reliable borrower (as long as you make payments on time, that is), remembering when each of your bills is due can become a hassle after a while. If this scenario sounds familiar to you, it might be time for a credit card consolidation loan.
In case you’re unfamiliar with credit card debt consolidation loans, they’re exactly what they sound like. These loans to pay off credit card debt are a great way for borrowers to centralize all of their outstanding balances into a single account, so only one payment is required each month. But not all debt consolidation loans are created equal, and a loan that’s perfect for one person might be completely wrong for someone else. That’s why we put together this guide to identifying the best credit card consolidation loans.
Pros and Cons
Before you apply for a credit card consolidation loan, it’s important to keep these advantages and drawbacks in mind.
- Consolidation loans make managing debt easy by only requiring one monthly payment.
- Borrowers will pay lower interest rates compared to credit cards.
- Consolidation loans can strengthen your credit score.
- Unlike refinancing options, consolidation loans usually don’t offer 0% promotional APRs.
- Not all lenders have the borrowers’ best interests in mind.
- An overwhelming number of options can make it easy to choose a less-than-desirable lender.
Lenders That Offer Credit Card Consolidation Loans
Here’s a quick look at three of today’s leading choices when it comes to credit card consolidation loans.
- APR range: 5.99%-29.99%
- Available loan terms: 36 - 60 months
- Loan amounts: up to $35,000
- Time to fund: same-day funding is often available
- Origination fee: 0.99% to 5.99% of the initial amount
- Credit needed: 640+
» MORE: Read our side-by-side Comparison of Marcus vs PNC Bank
Marcus: A division of Goldman Sachs, Marcus offers fixed-rate loans in amounts ranging from $3,500 to $40,000 with repayment terms from three to six years. There are never any fees with Marcus consolidation loans, and APRs start at 6.99% but can be as high as 24.99%. In order to qualify for a loan, a borrower needs to have a credit score of at least 660.
SoFi: Offering credit card consolidation loans ranging from $5,000 to $100,000 with APRs from 6.99% to 14.99%, SoFi is an excellent option for individuals whose debt has gotten out of hand. SoFi doesn’t advertise a minimum credit score that applicants need to have, but they tend to only approve individuals with FICO scores above 680. Borrowers must also be able to prove an annual income of at least $50,000. Additionally, SoFi never charges any fees and gives borrowers from three to seven years to pay off their balances.
Best Egg: Based in Delaware but with an office in the Bay Area as well, Best Egg offers loans from $2,000 to $35,000 with APRs from 5.99% to 29.99%. This lender is a bit more strict in terms of who they approve, and Best Egg does charge origination fees and late fees, which many other institutions don’t. That said, the most well-qualified borrowers will benefit from a nearly unbeatable interest rate.(Since the first two are no fee lenders would it make sense for this last lender to LightStream? They have a 4.99% starting APR, no fees and they have 2-7 year loan terms making it comparable to SoFi. Just my two cents. If there’s a good reason to choose BestEgg then I’m ok with leaving as is.)
Credit Card Refinancing vs Credit Card Consolidation Loan
When it comes to paying off credit card debt, borrowers have two primary choices: refinancing outstanding balances or getting a loan. Depending upon your credit history and how responsible of a borrower you are, one of these avenues is likely better for you than the other. So what’s the difference between these two approaches? Credit card refinancing typically involves transferring debt between lending institutions to take advantage of a low-interest rate, while credit card consolidation loans give borrowers the option to gather all of their outstanding amounts into a single account. But what are the advantages and disadvantages of each?
With credit card refinancing, lenders typically lure in borrowers with a 0% interest rate on transferred balances. Such promotional offers can last anywhere from 9 to 18 months, and they usually require a transaction fee that ranges from 1% to 5% of the transferred amount. These offers are great options for borrowers with smaller balances and the ability to make substantial payments each month. It’s important to pay off refinanced amounts during the promotional period because any balance that remains at the end of the term will be accompanied by a higher rate of interest.
On the other hand, credit card consolidation loans usually don’t have promotional, 0% interest rates, but they do often have lower APRs than what most credit card companies charge. Compared to refinancing, credit card consolidation loans can also be easier to manage in the long term. That’s because, in order to pay the least amount of interest through refinancing, a borrower might have to move a balance around several times before they’re able to fully pay it off. But with consolidation loans, your interest rate and monthly payment amount will remain consistent for the lifetime of the loan.
How to Get a Loan to Consolidate Credit Card Debt
If you’ve been asking yourself, “Should I consolidate my outstanding bills?” It’s likely time to get a personal loan to pay off credit card balances. But what’s the best way to go about this? Many credit card companies and lending institutions target debt-laden individuals by sending them promotional checks in the mail that can be used to refinance high-interest balances. If you’ve got decent credit, you’re likely used to pulling these envelopes out of your mailbox, because lenders tend to send them out every week. True, these checks can be used for just about any purpose, but credit card consolidation is perhaps the smartest way to use them.
If you don’t often receive such checks, or if you’re more interested in a consolidation loan than refinancing your debt, you might have to do a bit more research before finding the right loan for you. Fortunately, many lending institutions make it easy to apply for consolidation loans online. To help you determine which loan might be your best bet, here’s a closer look at the pros and cons of credit card consolidation along with an overview of three popular options.
If you’re ready to take control of your debt and start paying it down the smart way, one of these lenders will likely be an ideal fit for you.