The Best Ways to Consolidate Credit Card Debt, Ranked

Debt consolidation is a debt relief approach that can yield positive effects on your finances if done correctly, and involves combining multiple debts into a single, more manageable monthly payment—often with a lower interest rate. There are various ways to consolidate credit card debt, and the option that best suits you depends on a few factors like your overall debt load, your credit score, and other facets of your financial situation.

Benefits of Consolidating

With a debt consolidation loan, the proceeds of the loan are typically used to pay off all of your other creditors. This comes with three main benefits:

Lower Interest rate

Ensure that the APR on your new loan is lower than the APR on your existing debt to enjoy the benefit of a lower interest rate. This can help save you a significant sum of money in the long run.

Simplified Payments

Having debt across multiple credit cards can become burdensome and difficult to keep track of. By consolidating your debt, you only have monthly payment to worry about. With that said, having a lower APR is still the most important consideration, and you should never opt for a higher interest rate for the convenience of consolidation.

Higher Credit Score

A high utilization ratio is often a byproduct of maxed out credit cards. This can play a major role in negatively impacting your credit score. By using a consolidation loan to pay off your existing credit cards, you will be reducing the utilization on these cards. This is achieved through eliminating your credit card debt burden completely.

4 Ways to Consolidate Credit Card Debt

While there’s no “best” option, some ways of consolidating credit card debt are less risky or simply fit your financial situation better than others. Let’s take a look!

1. Personal Loan

Due to a rise in marketplace lenders, attaining a low-interest personal loan has become increasingly easy. Just keep in mind, the lowest rates go to those with the highest credit scores.

You can use a personal loan from a credit union, local bank, or online lender to consolidate your debt. Most lenders will even allow you to apply for a debt consolidation loan and shop around for the best interest rates without affecting your credit score. You can get a rate without a “hard inquiry” on your credit, unlike the majority of banks and credit unions.

While lenders may not charge fees for paying off your loan early, they may charge an orientation fee ranging from 1% to 5% of your loan.

2. Balance Transfer Card

balance transfer card is a type of credit card that charges zero interest for a promotional period, typically 12-18 months, which allows you to transfer over your other credit card balances. One caveat is that you’ll need to already have a good credit score—above 690—to qualify for most balance transfer cards.

If you do qualify, establish a budget that will allow you to pay off your debt by the end of the promotional period. Any leftover balance after that time will result in a regular credit card interest rate.

When choosing a balance transfer card, you’ll want to do your diligent research. While many cards will accept transfers, the action only makes sense if it saves you money in the long run.

Some things to consider before making your choice:

  • Balance transfer fee: Some lenders charge a balance transfer fee, which is often around 3% to 5% for the amount you are transferring. So if you have a balance of $1,000, a 3% fee would cost you $30.

  • Interest rate: Credit cards that are specifically created for balance transfers have the lowest introductory rates for transfers along with 0% promo periods.

  • Length of the promo period: A balance transfer card should give you some breathing room to pay down your debt, so shop around for one with a long no-interest period. Rates typically go up quite a bit after this introductory period, so it’s best to have your balance paid down as much as possible by then.

  • The annual fee: Some balance transfer card lenders charge an annual fee, but not all.

3. Home Equity Loan

If you own a home, you can take out a loan or a line of credit (LOC) on the equity of your home. An LOC works more like a credit card with a variable interest rate, while a home equity loan is a lump sum loan with a fixed interest rate. When used for debt consolidation, you use the money to pay off existing creditors.

What you should know:

  • Applying a home equity loan for debt consolidation is risky. If you are unable to pay back the loan, you could lose your home in foreclosure.

  • These types of loans often come with lower interest rates than other types.

  • You may have to pay closing costs with a home equity loan, which can range from 2% to 5% of the loan.

  • Using a home equity loan can potentially put you at risk for being “underwater” on your home if the value of your home should fall. This can make it more difficult to sell or refinance.

4. Withdraw or Borrow Money from a Retirement Account

If you have an employer-backed retirement account, such as a 401(k) or an IRA, you may be able use those funds to pay off your debt, but this should be a last resort as it can significantly impact your retirement.

One benefit is that there are no credit checks made to take money out of your retirement accounts. Varying circumstances may even entitle you to be exempt from paying an early withdrawal penalty on a qualified retirement plan.


  • You lower your retirement savings

  • You may have to pay penalty and fees

  • You must pay back the money within five years unless the money is being used to buy a home that will be your main residence.

Bottom Line

When thinking about the best ways to consolidate credit card debt, remember that each option depends on your own financial picture. It’s also always a good idea to begin with the options that do not require you to take on more debt or threaten otherwise protected money, like using a vehicle or home, which could expose you to risk.

If you’re unsure where to start, try out our Debt Consolidation Calculator that is crafted to help you find a debt consolidation plan that’s perfect for you.

* Please consult with your attorney, financial consultant/planner, accountant, and/or tax advisor for advice concerning your particular circumstances.  The information contained herein is for general informational and educational purposes only and should not be construed as professional, tax, financial or legal advice or a legal opinion on specific facts or circumstances. The information or opinions contained herein should not be construed by any consumer and/or prospective client as an offer to sell or the solicitation of an offer to buy any particular product or service. 

The information contained herein was prepared for general information and educational purposes only and should not be construed as professional, tax, financial or legal advice or a legal opinion on specific facts or circumstances. Eloan a Division of Banco Popular de Puerto Rico, its subsidiaries and/or affiliates are not engaged in rendering legal, accounting or tax advice. Please consult with your attorney, financial consultant/planner, accountant, and/or tax advisor for advice concerning your particular circumstances.