Do Debt Consolidation Options Make Sense?


By consolidating your debt, you can:

  • Reduce the amount you pay in interest
  • You can make it easier to manage your finances by reducing the total number of your bills

This option is a great way to gain control over your finances if you’re struggling with debt. Try it now:

How to consolidate

There are many ways to consolidate your debts. You might consider:

  • Cardholders can get low-interest credit cards.A low-interest card is a good option to consolidate smaller debts, such as less than $3,000 You can save the most by paying it off during the initial rate period.
  • Personal loansA personal loan gives you a fixed rate and a term. You can consolidate your debts and pay off the personal loan. Although you could count on regular payments, you can’t increase the loan amount.
  • Home equity loanTo consolidate larger debts, your home can be used as collateral to obtain an installment loan at a lower fixed interest rate. You might consider a home equity loan with an adjustable interest rate if you need continuous credit access for expenses.
  • Refinancing.You can choose to cash-out to pay your debts, and get a lower fixed rate if you intend to live in your home for some time. You will have to stay in the home long enough for closing costs to be recouped.

Things to be aware of

When you decide to consolidate your debts you will also need to:

  • Create a long-term debt management plan.You’ll still owe that amount even if you consolidate. If you don’t pay it off or take on additional debt, you’ve just increased your debt problems.
  • Be aware of the costs.You may have to pay fees for loans. Refinances will also incur closing costs. Be sure to weigh the pros and cons before you decide if debt consolidation is for you.
  • Set realistic expectations regarding low interest rates.Good credit is eligible for low rates. The lowest rates may not apply to you if your credit is poor.

The bottom line

Debt consolidation is ultimately your best choice. The right solution can help you simplify your finances while saving money.

Talk to a nonprofit credit counselor if you need more help managing your debt. They will give you impartial advice based on your particular situation.

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