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3 Strategies for Consolidating Debt

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Managing a bunch of burgeoning credit card or loan balances can be stressful — and tricky, particularly if you just can’t seem to get that debt off the books. You have to stay on top of all those due dates, since missed payments are the quickest way to tank your credit score. Plus, you’ll want to keep track of your annual percentage rates (APRs) so you’ll know what payments to prioritize. (A popular credit card debt payoff strategy, for instance, involves making minimum payments on all your balances, while throwing extra dollars toward the one with the highest interest rate to minimize those costs.) Of course, if you’re struggling to keep up, you can consider debt consolidation.

How Do I Consolidate All My Bills?

You’ve got a few options. Balance-transfer credit cards, for one, allow you to transfer high-interest credit card debt(s) over to a new card touting a low-to-no introductory APR for a certain period of time. Debt consolidation loans, also simply known as personal loans, let you effectively turn your debts into a single installment loan. (You use the funds to pay off your existing balances than make a single monthly payment at a set interest rate until the money’s all paid back.) And a personal line of credit lets you utilize a similar strategy, only the consolidated debt will still be a revolving credit line.

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    We’ll break these options down further, but one note before we dive in: Debt consolidation can help simplify your life, yes, but the strategy works best if you move your balances over to a credit line or loan with a lower interest rate. Those interest rates will be determined by your credit, so be sure to check your credit scores with’s free credit report snapshot before you apply. This completely free tool will break down your credit score into sections and give you a grade for each. You’ll see, for example, how your payment history, debt and other factors affect your score, and you’ll get recommendations for steps you may want to consider to address problems. In addition, you’ll also find credit offers from lenders who may be willing to offer you credit.

    Having said that, here are three debt consolidation strategies that can help simplify your plan to get debt-free.

    1. Consolidate Your Credit Cards

    Rather than pay five credit card bills each month, you can consolidate all those smaller credit card balances onto a single card — and potentially pay a lower interest rate on those charges. There are plenty of credit cards with low-rate balance transfer offers. You may qualify for a card with a 0% APR for a set period of time, usually 12 or 18 months. Note: You’ll generally pay a fee to move that balance, usually around 2% to 3% and there’s a chance you won’t be able to move all your balances to one card. (You typically won’t know what credit limit you’ve been approved for until after you apply, though you can call the issuer ahead of time to get an idea of where it might fall.) You can learn more about balance-transfer credit cards here.

    If you decide a balance transfer credit card is right for you, make the most of that rock-bottom interest rate and pay off as much of your debt as you can during the low-rate balance transfer period.

    2. Apply for a Personal Loan

    You can look into a personal loan from a bank or credit union to consolidate credit cards and other debt as well. Personal loans have fixed interest rates that are traditionally lower than credit card interest rates. Personal loans are installment loans — you agree to pay a certain amount of money back at a set interest rate for a similarly specified period of time. That means there will be a hard end date to your debt (so long as you make all your monthly payments as agreed, of course). It also means you’ll be tying yourself to that set payment each month, so it’s important to be sure it’s in your budget. Still, if you pay as agreed on a personal loan, all the debt you consolidated will be paid in full at the end of the loan term. You can learn more about personal loans here.

    3. Get a Line of Credit

    Another debt consolidation alternative involves using a personal line of credit from a bank or credit union to consolidate your debt. You don’t need to own a home or property to qualify for a personal line of credit and you may be able to get a credit decision and access to the cash you need to pay off other debts in just a couple of days.

    A personal line of credit works like a credit card. It’s a revolving credit account, meaning you get a pre-set credit limit, borrow what you need (you’ll pay interest on those funds), and get access to that credit back once you pay your balance. You borrow money from your personal line of credit by writing a check or making a transfer to your checking account. Note: There may be an annual fee associated with a personal line of credit.

    Again, the interest rate you pay on a line of credit depends on your credit. And you may qualify for additional discounts on the interest rate if you have deposit or other accounts at the bank or credit union. Be sure to ask.

    This article has been updated. It was originally published on January 23, 2014.

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      • Bonnie

        Funny how this works I’ve been trying to build my credit and have applied for credit cards always denied because there is no activity on my credit report my car is paid for and I have a apt so I really don’t have a lot of bills but I would like to buy a house and again I keep on hitting a wall

        • Michelle Anne

          Try starting with a store credit card first like Old Navy or JCPenney

        • Kate

          Go to a credit union and get a secured loan (secured by your savings account). Pay it off ASAP. Get another, pay it off. Get another, pay it off. Three times of this should greatly improve your credit score.

        • maggiemay

          You can use what’s called compensating credit to prove to a mortgage lender you’re credit worthy ie. utility bills, rent, cell phone bill. If you have a track record of timely payments that counts.

      • Rob

        Credit Cards are evil! Just don’t use them unless you can pay in full each month.
        I’m just a normal guy, but I do have a strong opinion on this – if you can’t afford it, save first and then buy it. Don’t borrow at a crazy interest rate (15-18%) to buy that new thing on credit. It’s not a financially smart decision to pay crazy interest rates and make someone else rich.
        There are plenty of web sites online to get advice. Look up strategies to pay down your debt. It frees you from the shackles of payments and feels amazing – trust me!! I’ve done it.
        I had credit card debt when I was in college. It sucked. So, I paid it off quickly way back when I graduated.
        Now, I am well into my career and *invest* my money instead of *paying interest* to some scum bag credit card company. It’s much better.
        It seems like an unachievable goal when you look at your total debt, but I will tell you that it can be done and it’s easier than you think to pay down your debt to 0. I only have my mortgage at 4%. And, I could pay it off if I wanted to.
        Some folks advocate to first stop the spending. That has to happen. Then, start paying in a debt snowball where you pay minimums on all cards and put as much as you can to the one with the lowest balance. When that card is paid off, put it all toward your next highest balance. You can see how you will eventually be paying over $1000 to one card and then it all goes away.
        Now, you’re free to first reward yourself with a small vacation, and then invest that money you were paying the cards with in a mutual fund. It grows like crazy and you will end up with some serious coin. I’m in my 40’s and there are many months that I make more in my investments than from working at my job. This is possible for you. It takes some dedication and drive, but you can do it.
        Credit councilors are available in this world to help guide you. I have read some of their stuff but never went to any formal classes. I won’t drop names – just find one that you think makes sense to you. And, this class is not a high expense. if they want to charge you thousands, walk out of the office. That’s robbery.

        Best of luck changing your financial world.

        • Gerri Detweiler

          Curious, do you use one you pay in full?

          • Rob

            Yes, I have one and pay it off every month.

      • Do For Self

        At 70 my goal is to be debt free in 3. Your ideas are methods that work. I have tried them all. Use a method you can trust, direct response. Talk it over with the party that extends the debt, make arrangements, keep in contact, pay the lowest amount first, until paid in full, all of what you owe.

      • Gerri Detweiler

        How kind of you to say that – thanks Sandra!

      • michwake

        Same advice I have seen.

      • michwake

        Capital One did the same for my Ex. They are usually willing to give people a second chance.

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