How to Consolidate Credit Card Debt on Your Own

DIY debt consolidation takes careful planning and discipline, but it is possible to consolidate debt without professional help.

If you have multiple credit card balances that you need to pay off, debt consolidation can help you get out of debt faster. You find a way to roll all your balances into one monthly payment. The goal is to reduce or eliminate APR, so you can focus on repaying what you owe instead of throwing money away on interest charges.

Still, do-it-yourself debt consolidation doesn’t work in every situation. You need good credit, plenty of free cash flow in your budget and the right amount of debt for it to be effective. You also need the discipline to cut back on your budget, stop charging, and focus on debt repayment. If you can do that, then you should be able to successfully consolidate credit card debt on your own.

If you’ve tried to consolidate credit card debt on your own and it isn’t working, talk to a certified consumer credit counselor to compare debt relief programs.

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5 important warnings if you consolidate credit card debt on your own

#1: You must stop charging

When you consolidate credit card debt, it zeros out your existing balances and leaves the credit cards open. That can be a huge risk if you’ve developed a credit dependency or bad credit habit. If you continue to make new charges on those cards, you’ll end up with more debt instead of less after consolidation. You’ll have your consolidated balance to pay off plus all those new charges. This is how consolidation can make a problem with debt worse, if you’re not careful.

In order to get out of debt effectively, you must stop charging until you have at least a significant chunk of your consolidated debt paid off. Make sure to make a budget and keep it balanced to ensure you can afford all your monthly expenses without relying on credit cards.

#2: Be aware of fees and how much they can impact your strategy

There’s a very big difference between $3 per transfer and 3% of each balance transferred. Let’s say you owe $1,000 on five different credit cards. If you only pay a transfer fee of $3 per transfer, then your total fees are $15. On the other hand, at 3% you’d end up paying $150 to transfer your balances. That’s a big difference.

Debt consolidation loan fees also matter. Loan origination fees are usually about 1-2% of the total amount borrowed. But not all lenders charge origination fees. If you can find a lender that doesn’t, you’ll save yourself some cash.

But the biggest fee you need to be concerned about when it comes to debt consolidation loans is early repayment or prepayment penalty fees. If your loan includes these kinds of fees, you’ll be penalized for trying to pay off your loan early. So, you want to get a consolidation loan that doesn’t have them. That way, if you get a tax refund next year and want to pay back a big chunk of your debt, you can do so without penalties.

#3: Some lenders may want to close your existing accounts

This usually doesn’t happen with balance transfer credit cards, but you may see it with some consolidation loans. When you apply for the consolidation loan, the lender will want to know about your current debts. If they see that you’ve consolidated before or that you keep running credit cards up to their limit, then they may approve you for the loan, but with caveats. Some lenders may require you to close your credit cards.

If you get a lender that has this requirement, you can decide not to take the loan. However, be aware that at the point where they make this stipulation, you probably already authorized the credit check. That means if you go to apply for another loan, you’ll have two authorized credit checks back-to-back. That may decrease your credit score, but the damage should be minimal.

#4: Same-company transfers usually aren’t permitted

Credit card companies are happy to take the balances that you have from other companies and consolidate them with a balance transfer. But most are unwilling to let you transfer their own balances. So, for instance, you can’t use a Capital One balance transfer credit card to consolidate debt from other Capital One credit cards. You can consolidate debt from Chase, Citi and Discover, but they won’t let you move your existing balances with them.

This can limit the effectiveness of balance transfers. If the best balance transfer card for your needs also happens to be the company that you already have account with, then you could be stuck.

#5: If one DIY consolidation option fails, you can always try another

The good news about consolidating debt on your own is that if you run into trouble after you consolidate, you can always try a different option. There’s nothing that prevents you from consolidating debt that you’ve already consolidated.

So, let’s say you complete a balance transfer, but you don’t pay off the balance before the 0% APR period expires. And you ran up new balances while you were trying to pay that debt off. There’s nothing that stops you from taking out a consolidation loan and including the balance transfer amount in the debt you pay off.

There’s also nothing that stops you from including consolidated debt in a debt management program. This is a professionally debt relief program that consolidates your debt at reduced interest rates. You can include debt consolidation loans and balance transfer credit cards in a debt management program.

That’s good, because it means that you don’t need to worry about being stuck with the first solution you pick. You can try the do-it-yourself paths and if they don’t work, you can call in the professionals. Just be careful not to fall behind with your payments while you try those DIY solutions. If possible, you want to avoid any credit damage as you work your way out of debt.

If you want to consolidate, but aren’t sure which option is right for you, we can help. Talk to a certified credit counselor for a free debt evaluation.

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Article last modified on December 11, 2018. Published by Debt.com, LLC . Mobile users may also access the AMP Version: How to Consolidate Credit Card Debt on Your Own - AMP.