When it comes to consolidating your credit card debt, it's vital to shop for the best possible rates. That means doing the legwork at banks and credit unions to compare the interest rates available to you. Before consolidating your debt, you should understand where your credit stands by reviewing your credit report.
Credit Unions
Credit unions typically offer lower interest rates and fees than banks. Unlike banks, credit unions are not-for-profit, which usually is reflected in the significantly lower rates available to members. If you don't have membership at a credit union, you may be able to join through a friend or family member who belongs to one.
Banks
If you have a long history with your bank and you've paid all your bills on time for credit cards or loans you have through the same company, the bank may offer you favorable interest rates on your consolidation loan. However, it's important to shop around and compare the interest rates of banks and credit unions to get the best possible rate for your needs.
Other Options
In addition to banks and credit unions, you may be able to consolidate by borrowing from other resources. You may borrow against your life insurance or retirement fund, which means you're paying interest to yourself rather than to a lending institution. If borrowing against your retirement account, you should make sure you understand when the funds must be paid back and what happens if you leave your current job.
Considerations
If you can't get a consolidation loan with a low interest rate because you have poor credit, you may consider contacting your credit card companies and requesting a lower interest rate on your cards. Often, if you've made on-time payments, simply asking will get you significantly lower rates. You may also consolidate through a nonprofit credit counseling program, which also helps you create a budget for more efficient spending in the future.
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