At a Glance

If you’re feeling overwhelmed by debt from multiple credit cards, you may find relief in consolidating. You’ll find there are many ways and strategies for paying off credit card debt, so take time to learn how credit card debt consolidation works, the pros and cons of each method, and which option works best for you.

In this article, read more about:


So, how do you consolidate credit card debt? With the goal of creating a new payment that has a lower interest rate than before, you take your credit card balances and combine the credit cards into one payment. This reduces the number of monthly payments you’re responsible for.

There are several strategies to pay off credit card debt, but the best way to consolidate debt depends on how much debt you have, how many credit cards you have, your credit score, and your future financial goals.

For most debt consolidation methods, you must meet certain eligibility requirements and apply for the consolidation method, such as a loan or balance transfer card. Once approved, you can use the new funds to pay off your old debts, then make payments toward the new one.

8 ways to consolidate credit card debt

Consolidating credit card debt is easier said than done, especially when a person doesn’t know the first steps to take towards consolidation. There are a number of different strategies a person can use, but that doesn’t mean all methods are right for a specific person. To find the best way to consolidate credit card debt, you’ll need to consider your financial situation, including your credit score, amount of debt, and commitment to getting out of debt. Let’s explore the pros and cons of the ways you can consolidate credit card debt.

1. Personal loan for credit card consolidation

Talk to a bank, credit union, or online lender about a personal loan, also called a credit card consolidation loan. If you qualify for a personal loan, you will use the loan to pay off your credit card balances and then repay the loan in one monthly payment. Note that bad credit may land you a higher APR, so make sure the personal loan’s interest rate is lower than your credit cards’ rates.


  • Pre-qualify without affecting your credit score
  • Fixed but negotiable interest rates
  • Repayment term of 3-5 years


  • Some loans carry a one-time fee of 1-8% of the loan amount
  • Potentially higher APR than your current credit cards


  • Eligibility requirements differ by lender
  • Better credit will help you get a lower APR

Real Stories

Nathan Clark, Co-Founders of Gate2ai, tackled his credit card debt by using credit card debt consolidation. “I explored the option of a personal loan to consolidate my debts into a single, more manageable monthly payment. This allowed me to simplify my finances and reduce the high interest rates associated with credit cards.

-- By Nathan Clark, Co-Founders of Gate2ai

Check out lenders and solutions that will meet your needs.

Advertiser Disclosure

Use the filters below to refine your search

Sorry, we didn’t find any options that meet your requirements. Please try modifying your preferences.

2. Balance transfer credit cards

This consolidation method moves your credit card balance from one or more credit cards to a single balance transfer card. Most balance transfer cards offer a 0% APR introductory period, often 12-18 months. However, most balance transfer cards also charge a one-time fee, which is usually 3-5% of the balance transfer. If you are paying 20-24% on your credit card balances, though, the fee may be worth it to pay 0% interest for 12-18 months. This introductory period can give you time to make progress on your debt without accumulating additional interest. That said, it’s critical to plan to pay off the debt during this time. Once the introductory period ends, you’ll be charged interest on the remaining balance until it is paid off.


  • 0% APR introductory period, often 12-18 months


  • May charge an initial fee of 3-5% of the amount transferred
  • Some cards charge an annual fee
  • The lender may check your credit with a hard inquiry, which may hurt your credit score


  • Good to excellent credit

Considering balance transfer options, you might explore the Wells Fargo Active Cash card, which often provides competitive introductory APR offers on balance transfers, allowing you to consolidate debt and manage payments more effectively. Alternatively, the Wells Fargo Reflect card is renowned for its low ongoing APR, offering a sustainable solution for debt consolidation and minimizing interest charges over time.

Related: How to Transfer Credit Card Balance?

3. Home equity loans

If you have equity in your home, you may be able to use some of that equity to pay off credit debt. This is called a home equity loan. Home equity loans can offer a lower interest rate than personal loans because your home is used as collateral. Talk to a mortgage lender about your options for a home equity loan, a home equity line of credit (HELOC), or cash-out refinancing, and whether one of these options would help you cover your debts. Before pursuing one of these options, though, be sure you can afford new monthly payments. Because your home secures the loan, if you default on the debt, the lender can foreclose on your home. This is not the case with unsecured personal loans.


  • Lower interest rates than personal loans
  • Longer repayment periods
  • You may qualify without good credit


  • Lack of payment may lead to foreclosure


  • You need equity in your home
  • The budget to repay this loan without delay

4. A 401(k) loan

It is possible to dip into your employer-sponsored retirement account to consolidate credit card debt. Plan well for these monthly repayments as the punishments are stiff, from heavy penalties and fees to taxes on the amount you withdrew. If you lose or leave your job, a 401(k) loan is due within two months.


  • No credit check, which means no impact on your credit score
  • Lower interest rates than you’d pay at a bank or another lender


  • You are decreasing your retirement savings
  • Lack of payment may result in penalties and fees
  • 60 days to repay if your employment situation changes


  • 401(k) retirement account

5. Peer to peer lending

Peer to peer lending occurs when a person obtains a loan directly from another individual without using a middleman. There are a number of official websites in existence today that connect wealthy lenders with borrowers who are in needs of fund. Finding a trusted peer to peer lender can potentially result in quick access to funds, but there are certain downsides.


  • Quick access to funds by taking away the middleman
  • Lenders may be willing to loan you money when other sources may not


  • Typically, higher interest rates due to increased risk


  • Lending requirements will vary by lender

6. Equity in owned vehicles

Similar to equity in a house, it’s possible to take out a consolidation loan against the equity built up in a vehicle you own. The only downside with this strategy is that a failure to repay the loan can result in the loss of your entire vehicle. Additionally, you will also need to completely own the vehicle prior to using its equity as a form of collateral.


  • Faster approval times
  • Lower interest rates
  • Larger loan amounts


  • Possibility of losing your vehicle if you fail to repay the loan


  • Owning the vehicle in your name

7. Reach out to friends and family

One common last resort option that can be used to consolidate debt is to reach out to your close friends and family to see if they are willing to loan you money. This money can then be used to pay off your various forms of debt. When borrowing from those close to you, it’s equally as important to pay them back under whatever terms are promised, otherwise you stand to ruin your relationship with that person.


  • Likely no interest rate
  • No hassle of dealing with a middleman


  • Small claims court may get involved if you cannot pay them back
  • Your relationship with this person may be damaged


  • Whatever terms are agreed upon between you and the other individual

8. Debt management plan

If you feel in over your head with credit card debt, there are other consolidation options. Reach out to a non-profit credit counseling agency to start a debt management plan (DMP). A credit counselor can help cut interest rates (generally by half), consolidate payments, and extend your debt-payoff timeline.

How credit card debt consolidation affects your credit score?

Credit card debt consolidation can impact your credit score positively or negatively, depending on how you handle the debt. Debt consolidation is meant to help reduce debt by making it easier to pay off. If used correctly, your credit score should improve over time. Once you pay off the balances on your credit cards with the consolidation loan, or when you transfer them to a balance transfer credit card, your previous creditors will report that your debt has been paid in full. This will help boost your credit score significantly.

After that, maintaining a strong payment history with the consolidated debt is the best way to continue the positive effect on your credit score. This means making payments on time and in full toward the loan or credit card you used to consolidate your debt. If you are unable to meet the debt obligations, though, as with any loan, your credit score will begin to decline rapidly.

Should I consolidate my credit card debt?

If you’re having a hard time making payments on or decreasing your credit card debt, consolidating your credit card debt may be right for you. As with any decision regarding credit card debt, it’s important to evaluate some of the pros and cons. Benefits of merging all credit card debts include reducing your interest rate and lowering monthly payments, which can balance some of the downsides such as fees for debt consolidation.

Related: Pros and Cons of Debt Consolidation

How to consolidate credit card debt on your own?

If consolidation doesn’t fit your financial situation, you might consider a DIY approach to reducing credit card debt. For these examples, you’ll be batching your repayment according to interest rates or amount. Do not include your mortgage as a debt, but instead focus on your credit card and other debts you may have.

The faster you can pay off your debts, the better for your financial situation and future.

1. Cash-out refinancing

This process essentially works by having a person refinance their car, truck, or other type of vehicle. The cash earned from this process is then used to consolidate your debt. When trying to do cash-out refinancing, visit as many lenders as possible. The evaluation of a vehicle can be subjective at times, so it is best to get more than one opinion.

2. Borrow from retirement

While it isn’t commonly known, you are able to borrow from a 401(k) plan by using an aptly named 401(k) loan. There are certain restrictions such as a five year limit to repay the loan (if you don’t want to pay early withdrawal fees), you can’t borrow more than 50% of your vested value, and if you leave your job you need to repay the loan in 60 days.

Additionally, don’t forget that you are taking money from your retirement fund. Should you not be able to repay in full, keep in mind what the consequences may be in the future.

3. Debt settlement

When debt settlement occurs, creditors agree to forgive a large part of your debt. In general, a debt settlement agreement happens when the borrower offers to pay a decently large lump-sum in return for a certain amount of the debt being forgiven. For those with access to funds, but finding long term repayment difficult, this can be a potentially helpful method.

4. Build and maintain healthy credit habits

One of the best ways to avoid debt and the need for credit card consolidation is to build healthy credit habits. Factors such as a low credit utilization ratio, monthly credit reviews and payments (as well as automated payments), and shopping for the best low rate credit card can help you stay on top of your debt.


Start your payoff plan right now

Build your payoff plan with MyCredello and you’ll be able to clear your debt sooner than you thought

Build your payoff plan with MyCredello and you’ll be able to clear your debt sooner than you thought


The best way to consolidate credit card debt on your own can vary from person to person, but balance transfer, personal loans, and utilizing 0% APR credit cards are all common strategies. Keep in mind that there are fees and other costs that can be associated with consolidating credit card debt, so be aware of the benefits and drawbacks of each strategy.

Read More: How to Consolidate Credit Card Debt on Your Own?

When looking for the best way to consolidate credit cards without hurting your credit, it’s important to remember that on time and in full payments are some of the fastest ways to increase your credit score. Do not take on additional credit if you are unable to meet the monthly payments. If possible, consolidate your debt into a format with 0% interest rate, such as using certain credit cards, so that the impact from the debt is minimized if you can’t pay.

Related Reading: How to Consolidate Credit Card Debt Without Hurting Your Credit?

There are a number of financial institutions that offer options for credit card debt consolidation loans. Working with a lender who you have an established history with may come with perks, such as customer support. However, you may be able to get a better interest rate from an online lender. When you get prequalified for a personal loan with multiple lenders, you can compare the options to find the best one.

Compare: Best Debt Consolidation Loans

Consolidating your credit card bills can be done with balance transfers, personal loans, cash-out financing, or debt settlement in the event it is necessary. The best way to avoid needing to learn the best way to consolidate credit card debt is by practicing good credit habits and avoiding taking on more than you can pay back.

Related Reading: How Bill Consolidation Loans Work?

Even if you have a low credit score, it’s still possible to consolidate credit card debt. However, in most cases, the lower your score the higher the interest rate on the consolidation financing will be. In some cases, you may not be able to get a lower rate on the consolidation option than your current debt. Your best options would be to use a balance transfer credit card, a personal loan, or tap into your home equity.

Related Reading: How to Consolidate Debt with Bad Credit?

When you consolidate your credit card debt in a mortgage refinance, you can put the home equity toward paying off the credit card. This option is called a cash-out refinance, and it can get you a lower monthly payment and interest rate on your home mortgage. However, cashing out the equity in your home means you’re losing that equity, as well as increasing your mortgage debt and extending the loan term.

To consolidate credit card debt into one card, you can use a balance transfer credit card. These cards typically have a 0% APR introductory period, so you can transfer your outstanding balances to one card and then have a period of time where you can pay off the card without accumulating interest. Just be sure to pay off the debt before the introductory period is up, or face high interest rates on the balance.

If you have student loans and credit card debt, one of the best options is to consolidate using a personal loan. If you have excellent credit, you’ll likely get the best interest rate and term with a personal loan.

When trying to combine credit cards into one card, it’s important to look at whether or not the consolidation closes credit cards. The answer to this question is that it depends on the situation. Debt consolidation alone will not close your credit card account, this is something you will still be responsible for. However, if the consolidation is a part of a debt consolidation plan, your debt consolidation partner will likely inform you that you should close your account.

Yes, partaking in debt consolidation in the past will not affect whether or not you can get a credit card in the future. However, if you are taking part in debt consolidation due to missing payments and more from a credit card company, they may not be willing to open another account for you again in the future due to a higher perceived risk.