There are three main downsides to juggling multiple outstanding debts at the same time: It takes longer to pay them off, there’s more potential for each account to rack up interest charges and it makes paying bills more complicated. So, it’s more expensive, more drawn-out and more of a hassle. When you put it that way, trying to consolidate multiple debts into one starts to make a lot of sense.
Here are four different approaches borrowers take when they’re trying to streamline their debts.
Transfer Credit Card Balances
Many credit cards offer a bright, shiny introductory interest rate — often boasting zero-percent APR — to get people to sign up. Borrowers with decent credit hoping to streamline their existing credit card balances may be able to transfer said balances to a brand-new card, thus earning a break from interest charges for as long as the introductory period lasts.
The advantage here is that you may be able to transfer one or more high-interest balances to a low- or no-interest card. This can help you get a leg up on paying down your balance, as less of your monthly payments will go toward servicing interest.
You will, however, pay a fee per balance transferred — usually between three and five percent of the balance. Another thing to keep in mind is that sometimes the tempting introductory rate only applies to transferred balances, not new purchases. This means to get the most bang for your buck you’ll need to avoid spending on the card and instead use it as a tool to pay down debt.
Take Out a Consolidation Loan

Another option is taking out a personal loan for the purpose of paying down your higher-interest accounts in one fell swoop. Then you’ll have the relatively simpler task of making a single payment over the loan term. The primary goal here is to reduce how much you end up paying in interest.
While borrowers with strong credit are more likely to get approved for loans with lower interest rates, debt consolidation for bad credit may still be preferable to trying to gradually chip away at a handful of high-interest credit cards.
It’s very important to commit to paying fixed monthly installments for the duration of the loan, often over the course of a few years. Furthermore, it can be tempting — yet detrimental — to start running up those credit cards again while you’re still working on the loan, potentially landing you in even hotter water than the first time around.
Refinance Your Mortgage
Homeowners with equity built up in their property may be able to refinance their mortgage at a favorable interest rate, ultimately meaning they have more to pay off in the long run but are able to take out a sum of cash in the short run to address high-interest debts.
This cash-out refinance strategy makes sense if you can get a lower interest rate on your mortgage, or if it’ll save you money to wipe out high interest debts. But extending your mortgage does lengthen the amount of time it will take to pay off your home loan — and means you’ll need to be extra vigilant against missing a payment for the longer duration of your mortgage, less you jeopardize your home.
Enroll in a Debt Management Plan
The first step here is meeting with a credit counselor to go over your budget and debt situation. From there, you may find out you’re eligible for debt management plan (DMP).
Through a DMP, you’ll start making a single payment to the credit counseling agency rather than paying creditors directly. The agency will pass on those funds to creditors, as well as try to negotiate down your interest rates and get fees waived to make repayment easier. There is a fee for accessing this service, but it may be able to save you more than you’ll spend. Expect DMPs to take three to five years.
Consolidating multiple debts into one can make it easier and more affordable to eliminate debt. The key is running the numbers beforehand to make sure you’re coming out ahead.
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