Should You Consolidate Your Debt? What You Need to Know
Published by Speed Credit
Table of Contents
- What Is Debt Consolidation?
- Types of Debt Consolidation
- When Consolidation Makes Sense
- When You Should Avoid It
- How to Consolidate the Smart Way
- Next Up: Balance Transfers—How to Use 0% APR to Crush Debt
What Is Debt Consolidation?
Debt consolidation is when you combine multiple debts (usually high-interest ones like credit cards) into one new loan with a single payment—ideally with a lower interest rate.
Goal: simplify your bills, reduce your interest, and pay off debt faster.
Types of Debt Consolidation
- Personal loan: Fixed interest rate, predictable monthly payments
- Balance transfer card: 0% APR intro offer (usually 12–21 months)
- Home equity loan or line of credit (HELOC): Lower rates, but your house is the collateral
- Debt management plan (via nonprofit credit counseling): Consolidates and negotiates lower interest
When Consolidation Makes Sense
- You have **high-interest debt** (credit cards, payday loans, etc.)
- You qualify for a **lower interest rate** on a new loan
- You can **afford the new payment** every month
- You want to simplify tracking and payments
Pro Tip: Consolidation only works if you stop using the old credit cards after.
When You Should Avoid It
- Your credit score is too low to get a better rate
- You’re likely to rack up new debt again
- You won’t be able to afford the new payment
- You’re using your house as collateral but have no equity cushion
In those cases, debt payoff or settlement might be safer.
How to Consolidate the Smart Way
- Check your credit score first
- Compare offers from real lenders (not just ads)
- Use a loan calculator to see total cost vs. savings
- Read the fine print—fees, prepayment penalties, and APR
- Make a plan to **avoid using the old cards** after consolidation
Next Up: Balance Transfers—How to Use 0% APR to Crush Debt
Want to move your debt without taking on a new loan? In the next article, we’ll cover exactly how to use balance transfer cards (the right way) in Balance Transfers: How to Use 0% APR to Crush Debt.
