For millions of American households, managing consumer debt has been a thorn in their side for years — and the answer to how to pay off credit card debt remains elusive for many.

Roughly 45 percent of families in the United States have credit card debt, according to the Federal Reserve’s Survey of Consumer Finances, up two percentage points since 2016. 

And though Americans reduced their average debt over the course of the past year, from $6,194 per household to $5,315, according to Experian, figuring out how to pay off credit card debt can seem daunting — even if you don’t owe much. 

Add high interest rates to the equation, and things can seem pretty hopeless.

When looking for ways to pay off credit card debt, consolidation loans are likely to be among the first options you’ll find. These are loans that are used to pay off all your credit cards today and obtain a lower interest rate that saves you money in the long run.

Lots of banks and other financial institutions offer them, and they can seem like a wonderful way to get out of debt more quickly.

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The Risks of Using a Consolidation Loan to Pay Off Credit Card Debt

If you dig deeper, however, some experts caution against using a consolidation loan. They’ll say it only puts a bandage on a leaky ship and just leads to getting oneself further in debt.

Many people end up right back in debt once they realize they can charge full balances again on their credit cards (although some loans require canceling credit cards to prevent this from happening). Even worse, these loans can end up costing more in the long term if they’re not managed correctly, or if the loan recipient continues to run a balance on their plastic.

I personally used a debt consolidation loan to pay off my credit card debt a few years ago. Since then, I’ve successfully kicked my bad credit card habits. Here’s how I did it while making sure greedy lenders didn’t take advantage of me or my money.

Why I Stayed in Debt

A few years ago, I had $8,000 in credit card debt. I knew that I needed to pay it off, but it seemed like an impossible task. I was making only $500 per week at my job — how could I ever hope to pay off the full balance?

I stayed in debt because I kept being tempted into putting new charges on the credit card.

I wouldn’t be able to pay it off in full at the end of the month anyway, so what was the harm in adding a few more dollars?

After a while, I decided to stop using my plastic and take the first steps toward paying off my thousands of dollars of debt.

How I Paid Off My Credit Card Debt

I made payments toward my debt each month — I even tried to pay more than the minimum. But still, the balance kept growing. I knew I needed a way out. That was when I learned about credit card consolidation loans, and why they’re not the perfect solution for everyone. 

I decided to go ahead with it, anyway. And I haven’t carried a balance since paying off my credit cards with the consolidation loan.

The reason I beat the credit card debt cycle was simple: I committed to changing my behavior.

Every time I use my credit card, I pay off the charge within a day or two. Normally it’s easy for me to forget these things, but I put it on my daily to-do list. I even incorporated it into my daily routine so that I never forget.

Each morning, after I brew a cup of tea, the first thing I do is pay off any charges from the day before. Extreme? Maybe. But it works.

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Should You Use a Consolidation Loan?

The reason that most experts advise people against taking out credit card consolidation loans is because the borrowers fail to change their behavior and continue to rack up more debt. 

“The main thing to consider when looking into consolidation is: Can you afford to pay off your current debt on your own?” advises credit analyst Simon Nowak.

“It may take a while and it may make things tight for a bit, but if you can pay off the debt yourself, you’ll be in better shape than if you get a consolidation loan, Otherwise, you’re just racking up more debt,” Nowak adds. 

I didn’t want to be a statistic. So I made a commitment to myself that if I took out this consolidation loan, I would always pay off my credit card. Otherwise, it would have all been for nothing.

How to Pay Off Credit Card Debt With a Consolidation Loan

The first thing you’ll need if you want to try using credit card consolidation loans is to find out if it will actually be cheaper for you to do this. You’ll need to write down three numbers: the interest rate (APR), the loan term, and the monthly payment, and employ the use of a consolidation loan calculator.

Loan Consolidation Calculator
Use our loan consolidation calculator to determine if consolidating multiple debts into a single payment might be right for you.
Debt 1
Debt Type
Balance
Interest Rate
Monthly Payment
Debt 2
Debt Type
Balance
Interest Rate
Monthly Payment
Add another debt (Up to 10)
Total Balance of Debt
New Interest Rate
New Monthly Payment
CALCULATE

Banks and online lenders usually lend only to people with moderate to excellent credit, so if you have bad credit, you can always talk to a credit counselor that’s certified by the National Foundation for Credit Counseling to explore your options. 

Do the Math

Next, run the numbers to see whether debt consolidation would actually save you money. 

“For example, if you repaid $10,000 over 60 months at a 20 percent interest rate, you would pay $265 per month — the interest fees you paid would total $5,894,” says lending expert Joe Toms. 

“If you could lower the interest rate to 16 percent with a personal loan, over the same period you would pay $243 a month, and save more than $1,300 in interest expenses,” Toms indicates. 

In doing so, make sure you account for the cost of origination fees — the charges you’ll incur for using the debt consolidation company’s services — in the context of your new interest rate.

“You’ll have to watch out to make sure origination fees and the interest charged are lower than you’re paying now, and won’t amount to you paying more money in the end,” says senior financial analyst Michael Cetera. “A consolidation loan isn’t a good option for someone with damaged credit, as you may qualify for a personal loan at a higher interest rate.” 

Individuals with bad credit should also consider that their loan provider may not report their progress to credit agencies, which therefore won’t improve their credit history. Additionally, paying off multiple lines of credit simultaneously (and in a timely fashion) can help to build a faster positive credit history than a single loan.

Do Your Research and Ask Questions

If you determine a consolidation loan will save you money, make sure that the company providing the loan is reputable. 

“Look for a lender with customer service from available staff — be that online or in person — that seems knowledgeable and professional,” Toms recommends. “Read reviews from non-sponsored sites, and seek out companies who are up front about fees, who will work with you to calculate your overall interest savings and determine the best loan for your situation.”

The Bottom Line

If it looks like you’ll save money in the long run, ask yourself: Can I actually afford the new monthly payment? Am I committed to not racking up a balance on my credit card?

If you can answer yes to both of these questions, then loan consolidation might be a good option for you.

Remember that you got into debt for a reason. Changing your spending habits — like I did — while working consistently toward a financially salient life is what has kept me debt free. 

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