First steps to a debt consolidation loan

Make the most of a debt consolidation loan

Consolidating all of your debt into one convenient monthly payment may seem like an organized and less-costly debt management solution, but first consider the risks. Using a debt consolidation loan may relieve some of your financial anguish if you're in the right financial position, but it could leave you worse off if you're not.

Budget for the loan payment

Before agreeing to combine your debts into one monthly sum, make sure you can actually afford it. Many jump into a consolidation loan thinking it's cheaper, but if the loan has a high interest rate, it may be more costly. Also, if you take on a home equity loan and default, the result is foreclosure.

Compare the cost

When considering consolidation, make sure to calculate and compare the cost of the loan with the cost of just combining credit card payments. Depending on the loan, it could cost you more to consolidate than to simply pay off the credit cards individually. Use's debt consolidation calculator to analyze which option is better for you.

Maintain discipline

After your cards are paid off with your debt consolidation loan, don't use them again. One common mistake among consumers is falling into the same old spending habits once the debt is paid off. The availability of your credit cards can be very enticing. Better to freeze them in a block of ice, lock them away or, if necessary, cancel and cut them up; just don't give in to more debt.

News alert Create a news alert for "debt management"


Show Bankrate's community sharing policy
          Connect with us
Credit cards on a table

Get advice for managing credit cards, building your credit history and improving your credit score. Delivered weekly.

Debt Adviser

Who pays deceased mom's debts?

Dear Debt Adviser, A couple of months ago, my friend's mother died. Her brother is handling the estate and has been wondering about their mother's $2,100 outstanding credit card debt. The mother had no assets except for... Read more

Partner Center

Connect with us