Whether you’re just getting started with tackling debt or have tried multiple strategies already, finding fast solutions that really work is crucial. If you haven’t tried consolidation yet, you might be skeptical: can debt consolidation really help you get back on track with your finances? Yes, but finding the right consolidation option for your unique financial situation is the key to success.
What is Debt Consolidation?
In the simplest terms, debt consolidation is when a consumer combines multiple monetary obligations into one debt. This is usually done to secure a lower interest rate and better terms, as well as to simplify monthly payments.
There are a few different types of debt consolidation, including consolidating through a loan or a credit card balance transfer and consolidating with the help of a debt consolidation company. The best method for you will depend on a variety of factors, including the total amount of debt you have and the types of debt you’re dealing with.
Does Debt Consolidation Really Work?
Yes! Like most things in life, the amount of effort you’re willing to put into debt consolidation will greatly impact the final results. If you choose to consolidate on your own through a loan or a credit card balance transfer, your chances of success are greater if you stick to a well-mapped repayment plan.
Consolidating through a debt consolidation company also requires planning and effort, but participants can lean on guidance from debt experts while cashing in on serious savings. A recent study from Harvard Kennedy School found that borrowers who worked through debt consolidation programs, after accounting for fees, received an average reduction of 33.2% on their debts.
When Is It Best To Consolidate Debt on My Own?
If you’re planning on consolidating on your own through a new line of credit, you’ll want to check that the pros outweigh the cons before diving in. Credit card balance transfers and consolidation loans typically work best if the following statements are true:
- You have a consistent stream of income that can go towards paying off your consolidation loan
- You have good enough credit to get a loan with a lower interest rate than what you currently have OR a credit card with a 0% introductory rate
- Your total debt payments, both secured and unsecured, aren’t equal to more than 50% of your income
- If you pursue a consolidation loan, you feel confident that you can pay it off within 5 years
- If you pursue a credit card balance transfer, you feel confident that you can pay off the debt before the introductory rate expires
When Is It Best to Work With a Debt Consolidation Company?
There are certain instances when consolidating your debt on your own might not be the best route to take. Look into working with a debt consolidation company if the below are true:
- You have more than $10,000 in debt
- You don’t have good enough credit to get a new loan or credit card with better terms
- Your total debts are equal to more than half of your total income
Which Debt Consolidation Options Are Best?
When you need a way out of debt fast but need to research what options are available, it can be hard to know where to start. Fortunately, we at Debt Consolidation Reviews can help you get started quickly with our top 5 lists. We’ve weighed the pros and cons of each service and have ranked the best options. Get started by reviewing our top 5 debt consolidation companies list today.