Credit card debt consolidation can represent several ways to pay off high credit card debt, usually from multiple cards. All money owed on cards, and possibly other debts too, are converted into a single loan. This loan is typically lower in interest rates, so that people save some money while paying off their debt. Types of loans that may be part of credit card debt consolidation include secure loans, such as loans against the equity in a home, and unsecured loans, which are often personal loans. Another option in credit card debt consolidation is working with a credit-counseling firm to combine all debts and make a single payment each month, which the firm distributes to lenders.

It used to be quite common for people to use a secured loan for credit card debt consolidation. However, this has become more difficult since the decline of home values in the late 2000s. Many people now don’t possess enough equity in their homes to secure large credit card debt. Poor credit can stand in the way of others who’d like to refinance their homes to meet debts. While this may still be a viable option for some people with impeccable credit, it is less of a possibility for many consumers.

An alternative for credit card debt consolidation is to use unsecured debt. For instance, a person could get a zero interest credit card and transfer all debt from other cards onto it. This means that theoretically the person would have a single payment monthly, and would pay less in interest while paying off the consolidated debt. Some people are able to manage this with a personal loan too, which is unsecured, but most personal loans do have an interest rate that applies and may not represent a great deal of interest savings. Again, it’s important to note that in the late 2000s, these options also shrunk as lenders became more concerned about taking on debt from any but those with the most impeccable credit.

The most viable method for many people who lack perfect credit is using a credit counseling service to attempt credit card debt consolidation. These services typically charge a fee but they can lower time it takes to pay off debt, and they may be able to get interest rates lowered. Some people can skillfully negotiate this on their own with creditors, but they’ll still make payments separately to each credit card company. When people use credit card debt consolidation through consumer credit counseling, their credit tends to suffer for it. This can be a disadvantage when it comes to applying for any new loans in the future.

There is another warning associated with credit card debt consolidation. It has to be partnered with sensible decisions about acquiring new debt. Many people pay off their debts with things like home equity loans, and then start the debt cycle over with more credit spending. Others who transfer balances to a new credit card retain their old cards and begin using them again. This can easily led to being in the same situation again within a couple of years. Financial experts strongly advise that people rethink credit spending when they’ve had to undergo debt consolidation, and exercise extreme caution using credit cards in the future.