If you are juggling multiple debts with different interest rates and due dates, debt consolidation might be the solution you need. It simplifies your finances and can save you money.
It combines multiple debts into a single loan with one monthly payment. Instead of tracking five different due dates, you manage just one.
You take out a new loan large enough to pay off all existing debts. Then you make a single monthly payment on the new loan, ideally at a lower interest rate.
Consolidation works best when you can get a lower interest rate, when you struggle to track multiple payments, and when you are committed to not accumulating new debt.
Do not consolidate if you cannot get a lower rate, if the fees outweigh the savings, or if you will just run up new debt after consolidating.
Personal loans, balance transfer credit cards, and home equity loans are common methods. Each has pros and cons. Compare carefully before choosing.
Debt consolidation is a tool, not a magic solution. Combined with disciplined spending, it can be your path to becoming debt-free.