How to Consolidate Bad Credit Card Debt

Are you dealing with several bad credit card payments at once? If you constantly feel like you’re balancing different payment deadlines, interest rates, and balances, you’re not alone. Credit card debt is on the rise across Australia, and the Reserve Bank of Australia claims the entire nation has a collective credit card balance of over $52 billion.

One effective way to stop feeling like a one-person juggling act with all of your credit cards with bad credit is to consolidate your debt. Consolidating your credit card debts is one of the best ways to manage your repayments and reduce how much you owe, especially if you’re paying several credit cards at once.

In this guide, we’ll dive deeper into how credit card debt consolidation works and why this is a good way to save money. Additionally, we’ll share some consolidation alternatives perfect for any credit rating. Don’t let your bad credit card debt get in the way of your financial freedom.

What Is Credit Card Debt Consolidation?

Consolidation will, quite simply, combine all of your debts into one loan. When you have only one loan, you’ll only need to repay one debt instead of several. In addition, it’s much easier to score a lower interest rate for your consolidated loan, and that means you can save a lot of money on the interest you would have spent paying off your credit cards.

In the process of consolidation, you’ll either make one consistent payment to your lender after they’ve paid your creditors on your behalf or you’ll use your consolidation loan to pay out your existing debts. Either way, it will be a much simpler process. If you receive the money in your own account, it’s tempting to spend the money from your new loan on repairs, upgrades or even a holiday. It’s important to pay off your debts and close the accounts so you’re not tempted to use them in the future, creating a debt spiral.

Why Should You Consolidate Your Credit Card Debt?

If you’re struggling with your debt, you might be wondering why you should bother consolidating your debt in the first place. When you’re already in a debt spiral, it makes sense to run as far away from “more” debt as you can. However, there are a lot of advantages to consolidating your debt, such as:

  • Reduced Interest – As we mentioned before, you might be able to reduce the interest you’re paying on your debt. Credit cards notoriously have higher interest rates, and a consolidation loan will likely offer significant savings.
  • Managed Repayments – Since you’ll only have one payment to worry about, it’s much easier to keep track of just how much you owe and when you need to pay.
  • Save on Fees – Those credit cards usually come with annual fees and other expenses that make them impractical for long-term savings.

Can You Consolidate Your Credit Card Debt with Bad Credit?

Even if you have poor credit, you still have options. There are lenders who are willing to work with you even if your credit history is less than perfect. While consolidating your debt with a single loan is a smart way to save on interest and potentially pay your debt faster, you’ll need to be careful of a few red flags.

There are different consolidation loan options for borrowers of all credit scores, including loans for bad credit ratings. Of course, in order to get the lowest interest rates, you’ll need a good credit score which means you’ve had a good repayment history. There are still lenders and credit unions that are able to offer loans for bad ratings, but you’ll need to pay close attention to these things:

  • Is this a lower interest rate? If the interest rate isn’t lower than you’re currently paying for your debts, there’s no point in consolidating.
  • Can you afford your new repayment plan? Since you’ll be taking on one larger loan rather than several smaller debts, you might notice a change in just how much you’ll owe each month. Ensure you can afford this new number.
  • Are there any fees? Consolidating your debts often includes some form of fee structure like loan establishment fees, monthly account fees, and so on.
  • Have you compared your options? Finally, make sure you’re comparing your options before deciding on the best loan for your situation.

This can be a lot to handle on your own. That’s why it’s helpful to have an expert at your side to help you decide on the best option for your financial situation. Make sure you review your debt payoff plan with our money pros before you make any big decisions.

Credit Card Debt Consolidation Alternatives for Bad Credit

If you don’t have the best credit, you might want to look into some alternative options. Luckily, there are a number of ways to get out of debt other than a debt consolidation loan. Talk with our financial professionals about these options below:

    • Home Equity Loan – If you have equity in your home, you can use this equity as collateral for a loan. You’ll also hear this called a second mortgage.
    • Personal Loan – With a personal loan, you can consolidate your debts at a lower interest rate while improving your credit rating. There are a number of loans for bad rating available from a variety of lenders.
  • Mortgage Refinancing – A mortgage refinancing allows you to pay off your debts along with your mortgage over its full term. You’ll also have a lower interest rate, saving you even more money.
    • Debt Agreement Debt agreements allow you to make regular repayments based on what you can afford – not what is owed. It uses part IX of the Bankruptcy Act to freeze the outstanding balance of your debts and stop any further interest, fees or charges.
    • Informal Payment Agreement – An informal payment arrangement is similar to a debt agreement. It will freeze the interest on your debts and stop creditors from calling, and lets you pay back your debts with an affordable plan.
  • Balance Transfer – Finally, you can transfer for outstanding credit card balances to a new credit card at a lower interest rate.

Your financial history doesn’t have to get in the way of you finding the right help you need. You’re not defined by your credit history, so don’t be afraid to seek out the right option for your financial situation.

Break Free From Your Bad Debts

If you’re ready to find a debt repayment option that works for you, it’s time to take action. You can consolidate your credit card debt even if you have a low credit rating. Even if you decide traditional consolidation isn’t right for you, there are other options like personal loans, mortgage refinancing, and more to fall back on.

With the right debt solution, you’ll be back to feeling financially free sooner than you think. If you’ve got bad credit and you want to consolidate your credit card debt, we’ll be here to guide you. We’ve helped thousands of Australians get back on track and we can help you too. Call 1300 368 322 to talk to one of our friendly experts now.

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Debt Busters is an Australian owned business which was founded in 2005 - since then we have been able to help thousands regain financial control.

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