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Consolidating your debt your mortgage

The best way to consolidate credit card debt — and whether consolidation will work for you at all — depends on your situation, so you might want to consult a non-profit credit counselor about your best options.

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Personal loans charge simple interest (as opposed to credit cards, which often have variable rates and sometimes have different rates for balance transfers and purchases on the same card) and they typically have loan terms of three to five years.A lender may lower the interest rate on your credit card balance when you participate in a debt management plan.Debt management plans typically last three to five years.You can get your free annual credit report from each of the three major credit reporting agencies — Trans Union, Equifax and Experian.And, Credit.com’s free credit report summary can help you understand what’s inside your credit report.And if you make your credit card or loan payments as agreed, you’ll establish a positive payment history, which affects your credit scores more than anything else.

(Payment history accounts for 35% of traditional credit scoring models.)Transferring credit card balances, paying off credit cards with a personal loan or enrolling in a debt management plan is only the beginning of credit card debt consolidation.

Promotional interest rates expire — like 12 months of a 0% APR on a balance transfer card — so make sure you can repay your debt within that time frame, otherwise you may not be saving any money at all.

The same goes for debt consolidation loans: Ask about any loan origination fees, and make sure the loan payment amount is something that easily fits into your budget.

(Not every creditor has to participate, so you may be able to keep a credit card out of the debt management plan if you need it to remain open for travel or business purposes, for example.)Once you complete your plan, some of your creditors may re-establish your credit based on your new, debt-free status and the on-time payment history you established through the course of the debt management plan.

Other ways credit card consolidation can hurt your credit: Applying for a new line of credit results in a hard inquiry on your credit report, adding a new credit account can lower the average age of your credit history and a new personal loan will show that you have a high level of outstanding debt (your scores should improve as your remaining balance shrinks from where it started). Adding a personal loan to your credit history can improve your mix of accounts (it’s good to have a combination of installment and revolving credit, like credit cards).

Then you’ll only have one monthly payment: the loan, the credit card or the debt management plan.