Credit Card Debt Consolidation Loans

A credit card debt consolidation loan is different to consolidating your credit card debts onto a balance transfer card. This latter actions means we intend to find another credit card with a lower rate of interest – most often an introductory period offer – and shift all our existing debts to that one card.

Whilst this balance transfer option may be preferable as it allows you to reduce your rate of interest to a lower one for a certain period of time, it may not always be possible. It may be that your credit rating will not allow such a manoeuvre, possibly because it has been done too often in the past, or it may be that your debts are so unwieldy that you cannot find a credit limit that would come close to accommodating them.

If this is the case, then a credit card debt consolidation loan may be the answer. With this, there are two options. The first is an unsecured personal loan, and the other is to add your credit card debts to your mortgage. Either of these will certainly work, but they have their advantages and disadvantages. The key factors here will be the rate of interest applied to the loan or mortgage, and the term of the loan.

The advantages of a credit card debt consolidation loan:

A credit card debt consolidation loan will clear your credit cards of debt. Provided you do not begin to run up any new debts on them, you can then concentrate on just one repayment each month, which should be at a much lower rate of interest. Depending on the term of the loan, it may pretty much equate to a lifetime balance transfer to another credit card. This means that you can relax a bit, knowing a much lower monthly payment is taking the pressure off.

The disadvantages of a credit card debt consolidation loan:

If taken out over a much longer period, which may well be the case when adding credit card debts to a mortgage, the cumulative effects of the interest charges on a credit card debt consolidation loan will make this a very expensive long-term solution. You may be looking at interest payments that reach into many thousands of dollars, rather than just a few hundred. You should also be careful with your loan-to-value ratio. If your original mortgage kept this below the 80% threshold, then you will have avoided paying Lender’s Mortgage Insurance. Adding new debts to your mortgage could push your loan-to-value ratio above 80%.

You should think very carefully before taking a credit card debt consolidation loan, and it certainly should not be your first resort to tackle credit card debt.

Related posts:

1. Personal Loans vs. Credit Cards In Debt Consolidation
2. GE Money Personal Loans including Debt Consolidation – Details & Application
3. Trimming excess debt with credit balance transfers and personal loans
4. Credit Card Debt Consolidation
5. ANZ Debt Consolidation Using A Balance Transfer Or Personal Loan
6. Debt Consolidation Advice – Information and Services
7. Credit Card Consolidation: Tips For Consolidating Credit Card Debt

Editor's Choice: Our Top Credit Cards

Credit Card	Card Details	Interest Rate (p.a.)	Cash Advance Rate (p.a.)	Balance Transfer Rate (p.a.)	Annual fee	Interest free days (up to)
St George Vertigo	Editor's Choice: Low Interest Low 2.99% for 6 months (reverts to 11.99%) p.a. interest rate and balance transfer rate, from one of Australia's most respected banks.	2.99% for 6 months (reverts to 11.99%)	20.74%	2.99% for 6 months	$55	55
Coles Group Source MasterCard	The Coles Group Source MasterCard has no annual fee, a 0% p.a. balance transfer offer for 6 months, with a rewards program including savings on fuel and FlyBuys Points	19.74%	21.99%	0% for 6 months	$0	62
Bankwest Zero Platinum MasterCard	Editor's Choice: No Annual Fee Excellent introductory offer with a $0 annual fee for the life of the credit card and a 1.99% p.a. for 9 months on balance transfers	16.99%	16.99%	1.99% for 9 months	$0	55