Pros and cons of consolidating credit card debt

08 Jan

And you might be wondering how you can lower your interest rate, monthly payments, or both.Let’s assume your credit card charges 18% APR, for example, and you qualify for a personal loan with a 12% APR.Are you carrying credit card debt with sky-high interest rates — in addition to your student loans? But think carefully before you use a personal loan to pay off credit cards.

Because if the interest rate is higher and/or the repayment term is longer, you will likely end up paying more in interest charges than if you didn't combine your debts into a single loan.

In this situation, it might (theoretically) make sense to take out a personal loan, use this money to pay off the credit card, and then start chipping away at repaying the personal loan with much lower interest.

You can also use personal loans to repay multiple credit card debts by consolidating them all into one payment with only one interest rate.

Federal student loan consolidation basics How to consolidate federal student loans Benefits of federal consolidation Drawbacks of federal consolidation Private student loan consolidation (student loan refinancing) When you consolidate federal loans, the government pays them off and replaces them with a direct consolidation loan.

You’re generally eligible once you graduate, leave school or drop below half-time enrollment.