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Debt consolidation lets you roll several high-interests debts into one manageable payment. Find out whether it hurts your credit. (iStock)
If you want to lower — or simplify — your monthly debt payments, debt consolidation may be right for you. It can help you organize your finances and make it easier to pay off debt. With debt consolidation, you’ll combine all your debts into a single payment so you won’t have to worry about multiple payments, interest rates, and due dates.
Just like any other financial strategy, debt consolidation isn’t for everyone. Here’s what you need to know about debt consolidation and its impact on your credit.
If you’re considering a personal loan to consolidate debt, Credible lets you compare personal loan rates from various lenders in minutes.
How does debt consolidation work?
With debt consolidation, you roll several debts into one manageable payment, ideally with a lower interest rate. It can help you simplify the debt repayment process and save on interest. A debt consolidation loan is a type of personal loan.
If you’re overwhelmed with multiple debts, such as outstanding credit card balances, medical bills, or tax debt, then debt consolidation may be a great solution. You won’t have to keep track of different payments and interest rates, allowing you to pay off your debt with less confusion.
Debt consolidation options
You can consolidate debt in a number of ways, including:
- Personal loan — You can take out a personal loan with a lower interest rate than all or most of your other debts and use the funds to pay off what you owe. Many financial institutions — like banks, credit unions, and online lenders — offer debt consolidation loans.
- Loan from friends and family — If you have a loved one with some extra cash, you may consider asking them for a loan at a low interest rate. You can use the funds to pay off your debts and pay back your family member or friend with one monthly payment. Just make sure the repayment plan is in writing so everyone is on the same page.
- Balance transfer credit card — Once you open a balance transfer card, you move your current credit card debt onto it. In most cases, the balance transfer card will come with a promotional 0% …….