Credit Card Consolidation, Pay Off Your Cards With One Loan

They stay open unless you close them. The loan pays the balances down to zero, and the credit lines are still there. That can help your credit, because you're using less of your available credit, but only if the cards stay at or near zero.

You'll see both terms used for the same thing. Refinancing credit card debt usually means replacing it with a lower-rate personal loan, which is exactly what a consolidation loan does. The name matters less than the rate, the fees and the term you're offered.

Most unsecured revolving debt qualifies:

• Major bank credit cards
• Store and retail cards
• Cards that are maxed out or close to it

Some people fold in other unsecured debts at the same time, such as medical bills. If a credit card cash advance is part of what you owe, it counts too, and it's often the most expensive balance on the card.

• The loan's APR is meaningfully lower than your cards' average APR
• The monthly payment fits your budget without new borrowing
• You're carrying balances on several cards and missing due dates is a risk
• You want a fixed payoff date rather than open-ended minimums

If your credit score would only get you a rate close to what your cards already charge, the savings shrink fast once fees are added. It's also a risky move if your spending is running ahead of your income, because the cleared cards can fill right back up. In that case, a nonprofit credit counselor may be a better first call. And if you've been covering card payments with short-term payday borrowing, tackle that first, since it usually costs far more than any card.

If your total balance is small and you could clear it in a few months, paying extra on your highest-rate card may cost less than taking out a loan. Consolidation earns its keep on bigger balances that would take years to clear on minimums. Our guide to the most common loan application mistakes is worth a read before you decide.

Many balance transfer cards offer 0% APR for an introductory period, often somewhere between 12 and 21 months. You usually need good to excellent credit to qualify, and the credit limit you're given may not cover everything you owe. When the intro period ends, any remaining balance starts collecting interest at the card's regular rate.

Most balance transfer cards charge a fee of 3% to 5% of the amount you move. On a $3,000 balance, that's $90 to $150 up front. It's often still cheaper than months of card interest, but it isn't free, and it's charged even if you pay the balance off quickly.

• A balance transfer can win if you have strong credit and can clear the whole balance before the intro rate ends
• A consolidation loan can win if you need longer than the intro period, want a fixed payment, or don't qualify for a 0% card
• Either way, compare the total cost, not just the headline rate

If you're still weighing plastic against a loan more generally, here's how a personal loan compares with a credit card.

When you formally apply, the lender usually runs a hard credit inquiry, which can lower your score by a few points for a while. Opening a new account also lowers the average age of your accounts. Both effects tend to fade within months.

Credit utilization, the share of your available card credit you're using, is one of the biggest factors in most scoring models. Paying your cards down to zero with a loan can cut that number sharply. On-time loan payments then add positive history every month.

Usually not straight away. Closing a paid-off card reduces your available credit, which can push utilization back up, and older accounts help the age of your credit history. If a card has an annual fee or you know you'll be tempted to use it, closing it can still be the right call.

• Check the likely rate and terms before you formally apply, so you're not collecting hard inquiries from several lenders
• Set up autopay so no loan payment is ever late
• Keep the cleared cards at or near a zero balance

Our guide to credit score ranges explains how lenders read your score, and a few steps can help you improve your credit score before applying.

Card minimums are often set at around 1% of the balance plus that month's interest. That keeps the payment low, but it also means most of what you pay goes to interest in the early years. A fixed loan payment is built to clear the principal by a set date.

The APRs on personal loans lenders in our network offer range from 5.99% to 35.99%, depending on your credit, income and the loan term. Credit card APRs typically sit in the low-to-mid 20s. The closer your offer is to the bottom of that range, the more you save. Credit unions are worth checking too, as many offer consolidation loans to members, so here's how credit unions work.

• Origination fee: some lenders take a percentage of the loan up front
• Late fees and returned-payment fees
• Prepayment penalties, which most personal loans don't have, but it's worth confirming

Add the fees to the interest and weigh that total against what your cards would cost. If the loan doesn't come out ahead, it's not the right offer. Be wary of anyone who asks for an upfront fee before arranging a loan or promises to wipe out your card debt; our guide to spotting predatory lending lists the red flags.

Yes, the cards usually stay open. Using one for a small recurring bill that you pay off in full every month can keep the account active and help your credit. The trouble starts when you carry a balance again. Removing saved cards from shopping sites and apps makes that harder to do on impulse.

If some balances aren't part of the loan, pick a payoff order:

• Avalanche: pay extra on the highest-rate balance first. It saves the most interest
• Snowball: pay extra on the smallest balance first. Quick wins can keep you going

Most new card debt starts with a surprise bill. Even a few hundred dollars set aside can stop the next one from going on a card. If something bigger hits before you've built that cushion, weigh emergency loan options against the card's rate before you reach for plastic, and keep an eye on your debt-to-income ratio as you go.

You fill in one short request with some basic details about you, your income and how much you want to consolidate. We look for a lender in our network that operates in your state and fits your profile. Many people see a decision within minutes.

You finish the lender's verification steps and sign its loan agreement. Depending on the lender, the funds either go straight to your card issuers or land in your checking account for you to pay the cards off yourself. If it's the second, pay the cards the same day so the money does its job. Taking out a loan for the first time? Our first personal loan guide walks through the steps.

Covero isn't available in every state, not everyone receives an offer, and the lender that approves your request may run its own credit check before funding. There's no cost to use Covero and no obligation to accept any offer.

When you're ready, you can start your request in a few minutes.