At a high level, debt consolidation typically refers to the act of combining multiple debts into one. Consumers do this to simplify the repayment process, lower their monthly bills and access more favorable terms. Here are the three most common types of consolidation that help everyday borrowers tackle their debt:
- Via a Debt Consolidation ProgramWhy navigate your finances on your own when you can consult with experts? These debt programs not only help combine multiple debt obligations into one simplified monthly payment, but they also include a team of debt specialists who work to secure more favorable terms and agreements. With professionals in their corner, clients in this program can expect to pay up to 50% less in monthly payments and an overall reduction in their total debt. These programs are usually best for those with $10,000 in unsecured debt or more. As for program length, these companies could help you resolve your debt in as little as 12-48 months.
- Debt Consolidation via New LoanSometimes the best way to tackle your debt is to move it to a different place. Debt consolidation loans can help you pay off multiple debts at once, allowing you to focus on one monthly payment instead of multiple due dates and payments. If you have a good credit history, you may even be able to secure a loan with a lower interest rate. However, this method of debt repayment does involve applying for and securing a more favorable loan. If your credit score isn’t in a good enough place to access a lower interest rate, consolidation loans may not be right for you.
- Debt Consolidation via Credit Card Balance TransferIf you can map out a plan to get a 0% introductory rate credit card, move all of your debt to your new card, and pay it all off before the offer ends, a credit card balance transfer may be the best type of consolidation to pursue. New credit cards can be tricky though, so be sure to read all of the fine print and understand how long your introductory rate lasts before adding a new credit card to your wallet.
What Type of Consolidation Is Best for Me?
Tackling debt isn’t “one size fits all,” and the best choice for someone else might not fit your unique financial situation. Here are a few questions to ask yourself before trying a particular consolidation strategy:
What kind of debt do I have?
Are you trying to pay off federal student loans or secured debt (like car loans and mortgages), or are you facing unsecured debts like credit cards, medical debt and personal loans? Some types of debt consolidation, like working through a debt consolidation program, can only help with unsecured debt.
How much debt do I have?
If you have $10,000 or more in debt and aren’t confident that you can pay it all off on your own within the next four years, you may benefit more from working with a debt consolidation organization. Debt consolidation loans and credit card balance transfers typically work best for those with less debt.
Can I create and stick to a repayment plan on my own?
Managing debt can feel incredibly overwhelming and isolating — could you benefit from expert support? Credit card balance transfers and debt consolidation loans require a DIY-mindset and a clear plan, as these methods typically don’t come with built-in support. Reputable debt consolidation programs, on the other hand, provide free consultations and unlimited access to a support team, both of which can make tackling debt easier and less stressful.
In Conclusion: Compare Your Options
In a sea of choices, it can help to have a guide. We at Debt Consolidation Reviews have done the research and ranked our top debt consolidation picks, saving you time and money faster. Check out our picks for the top 5 debt consolidation companies today.