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Should You Get a Debt Consolidation Loan for Your Credit Card Debt?

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BestMoney Staff
Bestmoney Staff
Dec. 05, 20212 min read
Many Americans struggle with credit card debt, and with interest rates rising, getting a debt consolidation loan is becoming an increasingly popular solution. Consolidating credit card debt can ease your financial burden, paying off your debt faster with one single payment. Here's what you need to know before taking out a debt consolidation loan.

How Debt Consolidation Loans Works With Credit Card Debt

Using a debt consolidation loan to pay your credit card debt is becoming a popular option. It's a relatively simple process. You simply take out a debt consolidation loan (a personal loan) and pay off all outstanding credit card debt you currently hold using those funds. Then, you make up a repayment schedule with the lender to pay back the loan each month. The lender you deal with will determine things like APR, repayment terms, and any fees involved in the process.

While debt consolidation loans can solve a lot of problems, some may consider it a rather drastic measure. If you are unsure if a debt consolidation loan is for you, comparing alternatives is easy. 

Our Reccomended Debt Consolidation Loan Provider


Freedom DR is one of the largest negotiators of debt in the US. The service works with a range of unsecured debt types, including credit card debt, personal loan debt, and medical bills. Freedom DR offers an initial consultation for free and an online dashboard to track your account status. The company also offers customer support 7 days a week.

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Benefits of Using a Debt Consolidation Loan to Alleviate Credit Card Debt

Taking out money to pay off one debt just so you have to pay off another debt doesn’t seem like a sensible solution. In fact, taking out a debt consolidation loan to pay off your credit card debt makes a lot of sense. Here are a few reasons how you’ll benefit from this course of action:

Single Payment

Probably the biggest advantage to paying off your credit card debt with a debt consolidation loan is the fact that you are paying out less money each month. If you have multiple credit cards you are juggling a balance with, you have to add up each of those payments to understand your monthly expenditures towards paying off this debt.

When taking out a debt consolidation loan, you pay off all of your credit card tabs using this loan. Then, you have to pay back the loan each month, but it's just a single monthly payment as opposed to several. So, you are saving significantly by only having to make a single payment rather than multiple credit card payments each month.

Lower interest rates = lower monthly payments

Another benefit of using a debt consolidation loan to pay off credit card debt is the possibility to actually lower your overall debt. How can this be accomplished? By receiving a lower interest rate on your loan. Let's explain. The higher the interest rate you are being charged, the more you pay each month in interest payments (and the more you end up paying out over time until you've paid off your entire credit card balance).

So, how can a debt consolidation loan help lower your overall payments? By charging you a lower interest rate. Frequently, private lenders will offer borrowers a loan with a lower interest rate than the one they are currently paying to the credit card companies. When you lower the interest rate, you lower the amount you have to pay.

More organization

Did you know that not everyone who is in debt is there because they've made poor financial decisions in the past? Interestingly enough, many people have landed in debt not because they're lousy with money, but for the simple fact that they are lousy with organization. Having multiple payments to send out every month to different locations can get confusing for most people. And once you start adding in multiple due dates, interest rates, and minimum payment requirements, we're all but lost in these catacombs of numbers and bills.

As mentioned, using debt consolidation loan funds, you condense all of your debt into a single monthly payment. So, there isn’t anything to keep organized or figure out. It’s one payment, sent out once a month, to one address. That’s a lot simpler to manage and something most people can handle even if they’re not good with numbers.

Increased credit score

Maxing out your credit cards isn't only bad news for your new fall wardrobe. It also means you've maxed out your credit utilization ratio. While these might sound like complicated terms, what you need to know is that it looks really bad for your credit history to have no more credit left to spend. By taking out a loan and paying off your credit card bills, you actually free up a lot of your credit, thereby improving your credit utilization ratio and increasing your credit score. How much can this help? A Lending Club survey showed that credit card debt consolidation loans helped consumers boost their credit scores by as much as 21 points in just three months. That's impressive math work!

Get the Right Debt Consolidation Loan for You

If you are drowning in credit card debt, it might be time to consider a debt consolidation loan. Choose a lender that offers a lower interest rate than you're currently paying, has flexible repayment terms, and will cover the amount of credit card debt you currently owe.

BestMoney Staff
Written byBestmoney Staff

Our editorial staff consists of writers who are knowledgeable about financial services. We specialize in simplifying the process of choosing the right provider for your needs.

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