Consolidate your debt if you can get a loan at better terms and/or it will help you make payments on time.
Your credit may be hurt if you run up credit card balances again, close most or all of your remaining cards, or miss a payment on your debt consolidation loan.
Do consolidation loans hurt your credit?
Debt consolidation can boost the credit scores of consumers struggling to manage several debts such as high-interest credit card debt, medical debt and student loans — if used properly. That said, there are some scenarios in which consolidation could, in fact, cause more harm than good to your credit score.
Is it smart to get a personal loan to consolidate debt?
Personal loans are one way you can consolidate credit card debt. While personal loans may have higher interest rates than secured loans, they often offer lower interest rates than credit cards — some as low as 6 percent. However, you typically will only qualify for rates this low if you have excellent credit.
Is it a good idea to consolidate debt with a personal loan?
Whether consolidating your debt is a good idea depends on both your personal financial situation and on the type of debt consolidation being considered. Consolidating debt with a loan could reduce your monthly payments and provide near term relief, but a lengthier term could mean paying more in total interest.
What is the smartest way to consolidate debt?
Here are some tips to achieve this:
- Keep balances low to avoid additional interest, and pay bills on time.
- It’s OK to have credit cards but manage them responsibly.
- Avoid moving around debt with a credit consolidation loan.
- Don’t open several new credit cards to increase your available credit.
Photo in the article by “Wikipedia”