Many Americans carry multiple debts, which can be difficult to track and manage. Debt consolidation allows you to combine multiple debts into a single payment, potentially lower your interest costs and simplify repayment. It is particularly useful when you have high-interest unsecured debts that are spreading your budget thin.
Debt consolidation is not a solution for every situation. Understanding how it works, which debts can be consolidated and when professional guidance is appropriate can help you make informed choices and avoid common pitfalls.
What Debts Can Be Consolidated?
Debt consolidation typically applies to unsecured debts. Common examples include:
- Credit cards – High-interest balances can be consolidated to reduce interest costs.
- Medical bills – Combining multiple medical bills can simplify monthly payments.
- Personal loans – Smaller personal loans can be merged into a single loan with one monthly payment.
In some cases, student loans or payday loans may also be consolidated. Secured debts, such as mortgages, auto loans or home equity loans, are not eligible because they are backed by an asset, which increases the lender’s risk.
Methods to Consolidate Debt
There are several common methods for consolidating debt, each with specific considerations:
- Personal loans: A personal consolidation loan pays off multiple unsecured debts. Benefits can include a fixed interest rate, one predictable payment and simplified repayment, though eligibility and interest rates depend on your credit score.
- Balance transfer cards: These allow you to move one or more credit card balances to a single card, often with an introductory 0% or low-interest period. Balance transfer cards are best for individuals who can pay off the balance before the promotional rate expires, otherwise interest may increase significantly.
- Home equity loans or lines of credit: Homeowners can tap into equity to pay off high-interest debts. These loans usually carry lower interest rates than unsecured loans, but the risk is higher because your home serves as collateral. Missing payments could put your property at risk.
- Professional debt relief services: Companies negotiate with creditors to reduce balances or improve repayment terms. This can be helpful if you have high debts and need a structured plan, though fees and potential impacts on your credit score should be reviewed carefully.
Each option comes with its own possible advantages and disadvantages. Weigh them carefully against your personal money goals, and consider talking with professionals like those at United Settlement for guidance to confirm how to consolidate credit card debt and other unsecured accounts with confidence.
Steps to Consolidating Debt
Here’s a step-by-step overview of how to consolidate your debts:
- Audit your debts: List all balances, interest rates, minimum payments and late fees. This helps identify which debts should be prioritized and gives a clear view of your total financial obligations.
- Check your credit score: Your credit score affects eligibility for consolidation loans or balance transfer cards. Improving your score can expand options and secure better rates.
- Compare loan terms: Review interest rates, fees and repayment schedules. A slightly higher monthly payment may save significant interest over time.
- Choose a consolidation method: Select the method that best fits your financial situation. For example, a balance transfer card is suitable for short-term repayment, while a personal loan is better for long-term planning.
- Combine payments and track progress: Make one consistent payment toward the consolidated account. Set reminders or automate payments to avoid late fees and maintain credit standing.
- Avoid accumulating new debt: Consolidation does not eliminate debt. Continuing to accumulate new debt can undermine your efforts and prolong repayment.
While moving through the debt consolidation process, it’s important to avoid increasing your debt even further, hindering efforts to reduce your overall debt balance.
Can You Consolidate Your Own Debt?
You can consolidate debt using balance transfer cards or personal loans, provided you meet eligibility criteria and commit to disciplined repayment. This approach works for individuals who understand the repayment terms and can manage accounts independently.
However, if your debts are unmanageable, complex or you’re unsure about eligibility, working with a professional debt consolidation company may be the best way to consolidate debt.
Why Talk With a Debt Consolidation Company
Debt consolidation companies connect you with licensed professionals who:
- Review your existing debts
- Recommend the best consolidation strategy
- Develop a structured repayment plan
- Monitor progress and answer questions
Professional guidance can reduce stress, ensure you understand your options and help prevent mistakes that could worsen your financial situation.
What Do Debt Consolidation Companies Do?
Debt consolidation companies help manage and reduce unsecured debts. They review your debts, recommend the best way to consolidate and create a clear repayment plan. They also monitor progress and answer questions throughout the process.
Who Do Debt Consolidation Companies Help?
Debt consolidation companies assist individuals with high amounts of unsecured debt that is difficult to manage. They provide guidance for those who can repay debts but prefer a single account instead of multiple payments, ensuring a clear, manageable plan.
Why Choose United Settlement for Debt Consolidation?
United Settlement is a trusted solution for debt consolidation. Our performance-based debt negotiation comes with a no-settlement, no-fee guarantee. We offer personalized, compliant and transparent services to help reduce unsecured debts and simplify repayment. When you’re ready to learn how to consolidate debts and regain control of your finances, United Settlement can help.
Steven Brachman is the lead content provider for UnitedSettlement.com. A graduate of the University of Michigan with a B.A. in Economics, Steven spent several years as a registered representative in the securities industry before moving on to equity research and trading. He is also an experienced test-prep professional and admissions consultant to aspiring graduate business school students. In his spare time, Steven enjoys writing, reading, travel, music and fantasy sports.
