Debt Consolidation vs. Credit Card Consolidation: What Is The Difference?

If you find managing balances very difficult, you can consider repaying these debts with a personal loan. In fact, we think it is the best option you can have to explore to pay your debts, whether credit card or any other kind of debts, off with monthly installments. 

So, the question of debt consolidation vs. credit card consolidation: How are they different isn’t even a debate to stress over. Both are the same thing; to roll all your debts and card debts into any personal loan that allows you to pay monthly installments, with different names.  

People call this consolidation a bunch of different names, including debts consolidation, credit card consolidation, or credit card refining. You can think of them as synonyms of each other. 

Debt consolidation and credit card consolidation are two strategies to manage your finances and improve your personal or credit card debt burden. If you want to consider it different, the only difference is how they function differently and are used for resolving different issues.

Despite being similar and yet different, the strategies are referred to as a personal finance process for people who find managing higher consumer debts difficult. In both cases, the entire process helps the consumer secure a low-interest rate on the total debt load. It also aims to ease the servicing of a single debt.

Both debt consolidation and credit card consolidation are useful for reducing the total number of creditors. You may also receive several secondary benefits with either strategy.

Debt Consolidation vs. Credit Card Consolidation: How Are They Different

Suppose you are eager to understand the difference between them, then, in that case, we try our best to make it easy for you to understand and learn about the minor differences between debt consolidation vs. credit card consolidation. 

Credit Card Consolidation

With credit card consolidation, all your card debts with higher APR rates get combined into a single debt at a low-interest rate on monthly installments with a due date instead of revolving credits. The strategy requires you to apply for a personal or debt consolidation loan; we will discuss this a bit later. 

The new debt load becomes a lot easier for you to manage compared to the original debt with a much lower interest rate. It would be safe to say that you will be able to get the debt load off more quickly, considering the new loan’s ease.

Credit card consolidation may rely on the current status of your credit score very heavily if you are thinking of paying off your card debt with refinancing or balance transfer. But if you approach it to pay with a personal loan, some creditors may accept your loan request on a comparatively fair or bad credit score. 

A few names of the best creditors of bad credit and credit card debt consolidation are Best Egg, Upgrade, SoFi, and more. 

If you consider credit card debt consolidation as your best option, calculate the total amount of combined debts you have to pay, then think of the loan amount that would be ideal for you to borrow. 

Later, do homework on the creditors that fit best to apply for a credit card debt consolidation. 

Once your request is approved, there is not much rocket science behind consolidating the debt. You can start paying it off the new loan as per your new repayment requirements. 

Debt Consolidation 

Debt consolidation means combining multiple debts and loans and refinancing them into a single loan; as we have already explained, with credit cards debt consolidation, all your card debt gets consolidated as a credit card refinancing loan. 

You must transfer the balance from multiple credit cards into a personal loan. These loans offer fixed monthly payments and interest rates, and the loan will last for a fixed period, typically 2 to 5years, after which you will be debt-free. 

A debt consolidation loan can be a secured or unsecured loan, whether you have put an asset as a security or not. But it all depends on your credit profile scores and how much debt you have to pay. 

People find debt consolidation loans a more feasible and affordable choice; rather than paying multiple debts with higher interest rates. Yes, the debt consolidation also boils down to the installment of your pay on a monthly basis with comparatively lower interest rates. 

However, beware that a majority of the creditors also charge you an origination fee against a debt consolidation loan. But the fee you pay typically is way cheaper than the fee you pay in credit card debt consolidation at the time of balance transfer.

Nevertheless, whether it’s debt consolidation or credit card consolidation loans, it’s easier for you to pay your debt loads and keep tracking them since you have to focus on a singular loan entity. It further simplifies your payments as you pay a fixed number of payments monthly with a fixed period that usually lasts for 5 to 20 years.

A Few Heads Up 

• The lower interest rates on debt consolidation or credit card consolidation sometimes become ‘teaser rates’ with an expiry. After the teaser rate term ends, the creditors may or may not increase the interest rate on the consolidation loan you are paying.

• The debt consolidation or credit card consolidation might have other fees included.

• The total amount of your consolidation loan can be a lot more than you initially thought of because the small installment you are paying is paid over a longer period.

Conclusion 

If you cannot manage your debts, your best possible options should be considering credit card refinancing vs. debt consolidation, choose whatever suits you best. Ultimately your decision should be based on the analysis of the different factors such as short-term or long-term goals. 

Regardless of which pathway you choose, make sure that you have enough knowledge about the fine print each comes with and have made your decision after comparing all the possible options. With extensive research on the creditor or the credit card issuer, the decision would be easier to make to fulfill your needs. 

And the most important thing to remember before you apply for a particular route don’t forget to consult the financial experts to understand what particular your case requires. As this ”Debt Consolidation vs. Credit Card Consolidation: What Is The Difference?” contains a very general perspective to make people aware of their possible options.