Credit cards are one of the most common forms of credit in the UK. Figures from 2021 show that, across the country, we owed a staggering £56.5 billion to credit card companies. With the average household having credit card debt worth £2,000, people are often exploring ways to reduce their monthly payments. This is where credit card consolidation comes in.
Credit card debt consolidation is a way of simplifying your monthly payments. It helps you to take control of your debts and, potentially, reduce the interest that you need to pay. We’re going to take a look at what credit card debt consolidation actually is and how it could work for you.
What is credit card debt consolidation?
Where people have credit card debt, it is often the case that they have more than one credit card. This can see them making payments to multiple lenders every month. It can become difficult to stay on top of so many payments and, when people investigate this properly, they see that they are often paying excessive amounts in interest.
Credit card debt consolidation sees the debt from your credit cards being moved to a single loan. The loan is used to pay off your credit cards so you then have a single monthly payment to make. This will not leave you debt-free, but it leaves you with debt that is easier to manage with lower rates of interest.
How can I consolidate my credit card debt?
To consolidate your credit card debt you will need to apply for a loan. Like any other loan, this loan will see you having to meet the requirements that lenders have in place. Your credit report will be looked at and they will also consider your levels of income.
If you meet the lenders’ requirements, you will have the loan approved. It is then down to you to use the funds from the loan for their intended purpose. If you fail to use these to pay off your credit card debt, you are potentially putting yourself in a worse position.
What if I have bad credit?
Part of checking your eligibility for a loan will include a credit check. If your score is low, and your report is looking less than healthy, it may impact your chances of taking out a loan. That being said, there are companies that will provide debt consolidation loans for bad credit so a poor report doesn’t necessarily exclude you from this option.
If you are approved for a credit card debt consolidation loan, you must keep up your repayments. A single payment should be easier to manage and by sticking to this, you have the chance to improve your credit score. If you can resist the temptation of instantly reusing your credit cards, it is worth leaving these accounts open as the amount of available credit you have can be a positive for your credit report. However, if you feel that the temptation may be too much, the safest course of action is to close these accounts as soon as you have consolidated the debt.