Should You Consolidate Debt?

Debt consolidation offers a way to combine some or all your debts into a single payment, often at a lower interest rate. If you have substantial debt that carries high interest rates, a debt consolidation loan may lower your payments and allow you to pay off your debt more quickly.

Which Debts Should You Consolidate?

Begin with any unsecured debt that you have. Unsecured debt is any debt that isn’t backed by an asset, such as your home or car. Paying off credit card balances that carry high interest rates is frequently the reason people seek debt consolidation loans, but consolidation may also benefit those with medical debt or cash advance (i.e., Payday) loans, which typically have high interest rates.

Favorable Terms

A debt consolidation loan allows you to pay off multiple creditors and make a single payment each month to one lender. Unlike credit cards, consolidation loans have a clear timeline for paying off the debt. The monthly payment may be lower than the combined payments you are currently making.

Benefits of Consolidation

Having a single payment each month can simplify your finances and make them more manageable. By not having to keep track of multiple debts, you’re less likely to miss payments that incur late fees and reduce your credit score.

First Steps

Before you apply for a debt consolidation loan, make sure you aren’t behind on any payments. It’s also a good idea to check your credit score to see where you stand.