The 5 Best Ways to Consolidate Credit Card Debt

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Updated on Wednesday, May 16, 2018

More than half — some 112 million Americans — carry credit card debt from month to month. The average balance debt holders carry is $4,453.

Credit card debt can quickly spiral out of control if you don’t pay it off in full each month, especially if you have debt on more than one card. With interest rates well into the double-digits, failing to aggressively attack credit debt can leave you paying far more than you ever intended.

One of the best ways to face credit card debt on multiple cards is to look for ways to consolidate that debt into one new loan with one monthly payment. This makes your payments easier to manage (you’ll only have one!) and it can save you boatloads on interest charges, especially if you can get a loan that carries a lower APR.

To consolidate, you’ve got several options. You can open a new credit card and complete a balance transfer or take out one of several loans to cover your debt. In this post, we’ll discuss how to get out of debt with a balance transfer, credit card consolidation loan also known as a personal loan, home equity loan and 401(k) loan, as well as tips on becoming debt-free for good.

5 options to consolidate credit card debt

Tip: Trying to figure out which option is best to consolidate credit card debt is a tough decision. Luckily, we have the tools to help make the decision process easier. Use our widget below to see which option is best for credit card consolidation!


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1. Balance transfer

What is it? Balance transfers are when you transfer debt from a current credit card to a new card, ideally one with a 0% intro APR period. The intro period is for a set amount of time that can range from 6-21 months. Many cards offer 0% intro APR balance transfer offers in order to convince credit card users to give them their business. It’s a win-win situation for the lender and the borrower.

When should you use it? If you’re looking for an interest-free way to consolidate your debt, a balance transfer can be a great choice — as long as you pay off your debt before the end of the intro period.


  • May be able to pay off your debt during the 0% intro period, therefore avoiding any interest charges.
  • The new card you open may provide long-term value if it offers additional perks or rewards.
  • There are cards that have $0 intro balance transfer fees, allowing you to cut costs if requirements are met.
  • No prepayment penalty.


  • Balance transfers can’t be done between cards from the same issuer.
  • You will need good or excellent credit to get the best BT offers.
  • If you don’t pay your balance before the end of the intro period, you may be hit with all the interest you accrued — known as deferred interest.
  • A balance transfer fee may be charged, typically 3% of your total transfer.
  • Most balance transfer cards require good or excellent credit.

Balance transfer rules to follow: Transfer balances soon after opening the card since many offers are only available for a limited time, usually around 60 days. And, make sure you aren’t late on payments since that may result in the cancellation of your 0% intro period. Also, make sure you pay your balance before the intro period ends so your debt isn’t hit with the ongoing APR and you avoid possible deferred interest.

How long a balance transfer takes: Balance transfers typically take 14 days to post to your account. While you wait for the transfer to post, continue to make payments on your balance so you don’t incur late fees if a bill is due soon.

Where to find the best options: Start by comparing offers online. Read our guide on the best balance transfer cards that includes options with long intro periods and $0 intro balance transfer fees. And, you can use our personalized tool to find even more options.

2. Credit Card Consolidation Loan

What is it? Credit card consolidation loans, better known as personal loans are unsecured loans that offer a fixed amount of money for a fixed amount of time and at a fixed interest rate.

When should you use it? If you’re someone with less-than-perfect credit looking for a straightforward way to consolidate debt, a personal loan may provide increased approval odds compared with a balance transfer credit card.


  • You can pre-qualify for many personal loans without hurting your credit score, allowing you to shop around for the best rates.
  • Personal loans are unsecured, meaning if you default on your loan, the bank can’t take your personal property.
  • May be able to get approved even with poor credit, but expect higher interest rates in return.
  • Payments are fixed so you’ll know how much money to set aside each month to pay back your loan.
  • Typically no prepayment penalty. That means if you pay your loan early, you won’t incur fees.


  • Interest rates vary by credit scorewith rates as low as 2.49%. If you have a credit score below 600, you most likely will receive a high-interest rate.
  • There may be an origination fee (also known as an upfront fee) which is nonrefundable and deducted from your total loan amount before you receive the loan.
  • The loan amount is typically capped at $100,000, which is low compared with some secured loans (though it’s unlikely you’ll need more than $100,000 for credit card debt).

How to use it effectively: Use the funds from the loan to pay off any debts you may have across various credit cards. After your credit card debt is paid off, it’s time to pay off your personal loan. Set up autopay or set aside the monthly payment amount so you can make payments on time and avoid late fees and damage to your credit score.

How long does it take to get the funds? Depending on the loan you take out, you may receive funds in one business day or in a few days.

Where to find the best options:  View our page about the best credit card consolidation loans or you can use our interactive comparison table here or the widget below.

By clicking “see offers” below you can compare up to 5 personal loan options from lenders without hurting your credit score!


As low as 2.49%

Credit Req.

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Origination Fee



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Advertiser Disclosure

LendingTree is not a lender. LendingTree is unique in that you may be able to compare up to five personal loan offers within minutes. Everything is done online and you may be pre-qualified by lenders without impacting your credit score. Terms Apply. NMLS #1136.

As of 17-May-19, LendingTree Personal Loan consumers were seeing match rates as low as 2.49% (2.49% APR) on a $20,000 loan amount for a term of three (3) years. Rates and APRs were based on a self-identified credit score of 700 or higher, zero down payment, origination fees of $0 to $100 (depending on loan amount and term selected). Terms Apply. NMLS #1136

3. Home equity loan

What is it? Home equity loans are for a fixed amount of money for a fixed time and at a fixed interest rate — but they are secured by your home. That means your home is collateral, and if you default on your loan, the lender may foreclose on your home. You can borrow a certain percentage of your home equity. That’s how much your home is worth minus how much you owe on the mortgage.

When should you use it? If you don’t mind putting your home up for collateral to pay off your credit card debt, a home equity loan may provide you with a large sum of money that can be used to pay off more than just credit card debt.


  • Typically longer terms and lower rates than personal loans.
  • While lenders typically cap home equity loans at 85% of the equity in your home, the loan amount may be larger than what a personal loan would offer.


  • Your loan is secured by your home, so if you don’t make loan payments, your home may be foreclosed upon.
  • Home equity loans come with more fees than personal loans and may have appraisal, application and processing fees in addition to an origination fee.

How to use it effectively: Pay off credit card balances with the money you receive from your home equity loan. Then, stay current on your loan payments so you don’t fall behind, risking fees, damage to your credit score and the foreclosure of your home.

How long is the application process? It may take up to a month.

Where to find the best options: You can compare home equity loans within minutes via LendingTree’s home equity page.

4. 401(k) loan

What is it? A 401(k) loan is when you borrow money from your existing 401(k) plan to pay off debts. The amount you can borrow is limited to the lesser of $50,000 or 50% of your vested balance. After you withdraw the money, a repayment plan is created that includes interest charges. You typically have five years to pay off the loan, and if you take out the loan to buy a house, your term may be extended to 10-15 years.

When should you use it? If you are willing to take the risk that you’ll still be at your current job during the length of time it takes to pay off your loan, you may be able to consolidate credit card debt with a 401(k) loan.


  • The interest you pay on your loan is to yourself, not a lender.
  • You typically repay the loan via automatic payroll deductions, so you don’t have to worry about when your payment is due.
  • The interest rate is usually lower than what you’re currently paying on your credit card(s).
  • There is no credit check, so this could be a decent option for people with bad or fair credit.


  • If you lose your job, your loan is typically due in full within 60 days. And, if you can’t pay it off in that time, the remaining balance will be taxed and may incur a 10% penalty.
  • You have to stay at your current job until the loan is paid off in order to avoid the fees mentioned above.
  • You miss out on potential investment gains while you owe money on your loan.

How to use it effectively: The money you withdraw from your 401(k) loan should go directly to paying off your credit card debt. After your debts are paid off, payments most likely will be taken from your paychecks until your loan is repaid. If not, continue to make regular, on-time payments. While you’re repaying your loan remember to keep your job — don’t quit and avoid any actions that may lead to your dismissal so you aren’t subject to penalties.

How long until I get the loan? The time it takes to get your loan depends on your plan and whether you can fill out the application online or with physical forms.

Where to find the best options: Your loan option depends on your 401(k) plan. Contact your plan provider or benefits representative.

5. Debt management plans

What is it? A debt management plan, or DMP, consolidates your credit card payments — not your credit card debt. Instead of making several payments to various creditors, you make one payment to your DMP and your credit counselor will use that payment to pay the debt you owe to various lenders. Your counselor may also try to negotiate lower rates and fees associated with your debt.

When should you use it? If you struggle to make minimum payments on your credit card and bring in a stable income, a DMP may be the solution to consolidate your payments and potentially lower rates and fees you’re charged on debt.


  • Before you open a DMP, a credit counseling session is required. This helps analyze your current financial situation and even recommend a different program that is better suited to your situation.
  • Typical plans take four or five years to complete, which is shorter than it would take if you only made the minimum payment on your credit card debt.
  • Your counselor may negotiate better terms for your debts which may include lower interest rates and less fees.


  • In most cases, you can’t use your credit card while a DMP is active and you can’t open new cards. Creditors may even suspend or close your lines of credit.
  • There may be a fee for the initial credit counseling session and for enrollment. That’s in addition to monthly fees.

How to use it effectively: After you complete your credit counseling session, stick with the DMP your counselor set up. That means make consistent, on-time payments, and you can see your credit card debt begin to decrease.

Where to find the best options: We recommend the nonprofit, National Foundation for Credit Counseling (NFCC), which provides a financial counseling session that may recommend a DMP run through an NFCC member agency. The NFCC’s plans typically take 36-60 months to pay off debts. Learn more here.


Staying debt free after credit card consolidation

Pay your bills in full and on time.

Payment history is a very important factor of your credit score, making up 35% of FICO Scores. And, it’s key to pay on time and in full every month to avoid late payments, penalty APRs and debt. You can set up autopay to prevent yourself from missing payments or sign up for payment reminders.

Create a budget.

The cause of your debt may be due to overspending, and that’s where creating a budget can help. You can view a snapshot of your expenses and see where you’re able to cut costs and hopefully save money to pay off debts you may have. There are plenty of budgeting apps that are free and allow you to link various accounts to get a holistic view of your finances.

Set up an emergency fund.

Sometimes you fall into debt due to unexpected expenses that may arise from medical issues or other events. An emergency fund can be a great way to provide yourself with a safety net in the case of unexpected expenses that may otherwise put you in debt. It’s up to you how much you put into an emergency fund, but keep in mind it should be somewhat easily accessible so you can quickly withdraw it to pay bills before they become past due.

Resist the temptation to overspend just to earn rewards.

If you have a rewards card, you may be tempted to spend more money than you have just to earn rewards. As a result, you may need to rethink why you’re using your credit card. You may come to the conclusion that a rewards card isn’t the best option for you. That doesn’t mean you can’t still use credit cards — there are plenty of credit cards you can choose that are basic and don’t have rewards.

>>View the many benefits of living debt-free here! <<


Bottom line

Ultimately, the best way to consolidate credit card debt depends on your financial situation. If you want a quick application process and the potential for no fees, you may choose a balance transfer credit card. Meanwhile, if you don’t have the good or excellent credit needed for a balance transfer credit card, you may look toward loans. If that’s the case, the question becomes whether you’re willing to put your home up for collateral to get a potentially higher loan amount, or withdraw from your 401(k) or simply receive cash from an unsecured option like a personal loan. And, if you struggle with managing payments for various credit card debts, you may lean toward a debt management plan. Whichever option you settle on, make sure you have an actionable plan that allows you to fully repay the loan during the term and maintain a debt-free life.


When you consolidate credit card debt, you use funding from a new source — such as a personal loan or balance transfer card — and pay off your debt. That leaves you with one monthly payment to manage going forward.

People typically consolidate credit card debt if they have debt on high-interest credit cards and are incurring high-interest charges. By consolidating credit card debt, they can potentially save a great deal of money on interest payments and get out of debt sooner than if they left their debt on high-interest credit cards since more of their payment will go toward their principal balance.

  Click here to view the benefits of using a loan to pay off credit card debt

Before you consolidate credit cards, make sure you have a clear payment plan that can help you tackle your debt. Beware of simply moving your debt from credit cards to another form of debt; it may feel like you’re suddenly debt-free but you are definitely not. You’ve simply reorganized your debt and it should become more manageable now. If you fail to make sizeable, consistent payments toward your debt, you could find yourself back in the same cycle of debt. Also, when selecting your consolidation method — for example, an intro 0% APR credit card, personal loan, etc. — be sure to look closely at the fees you may be charged. The fees are typically outweighed by the amount you save in interest, but it’s a good idea to review them.

Your credit score can be affected by consolidating credit card debt — but the overall effect on your credit score should be positive, as long as you pay off your debt. If you open a new credit product like a credit card and consolidate your credit card debt, your credit score may temporarily decrease due to the inquiry and opening of a new account, but it’ll bounce back soon. Your score can actually benefit from the increased line of credit you’ll receive from the new card, as long as you keep your other credit cards open. And if you are consolidating credit card debt with a personal loan, you should see a boost to your score because you are paying off revolving lines of credit. Also, by taking out a fixed-rate installment loan, your mix of credit may improve, which is one of the factors that make up your credit score.