{"id":356046,"date":"2018-09-12T07:00:07","date_gmt":"2018-09-12T13:00:07","guid":{"rendered":"https:\/\/www.creditrepair.com\/blog\/?p=356046"},"modified":"2022-03-29T21:10:36","modified_gmt":"2022-03-30T03:10:36","slug":"how-to-consolidate-debt-the-right-way","status":"publish","type":"post","link":"https:\/\/www.creditrepair.com\/blog\/finance\/how-to-consolidate-debt-the-right-way\/","title":{"rendered":"How to Consolidate Debt the Right Way"},"content":{"rendered":"<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-355072\" src=\"https:\/\/www.creditrepair.com\/blog\/wp-content\/uploads\/2018\/08\/Debt-Consolidation.jpg\" alt=\"debt consolidation \" width=\"500\" height=\"332\"><\/p>\n<p>Haunted by the ghosts of financial past? If you\u2019re like the <a href=\"https:\/\/www.debt.com\/americas-voice-on-debt\/40-percent-americans-cant-pay-bills\/\">40 percent of Americans who can\u2019t afford to pay bills<\/a>, something clearly has to give. Whether plagued by high APR credit cards or old loans you can\u2019t afford anymore, past borrowing mistakes have a significant effect on your financial future. Luckily, debt consolidation \u2014&nbsp;if properly executed \u2014 can provide effective course correction.<\/p>\n<p>Debt consolidation is the process of combining several small loans into one large one \u2014 think of it like a universal remote for personal finance. Not only does debt consolidation help organize all loans into a neat package, but it can also save you a lot of money.<\/p>\n<h2>How debt consolidation saves money<\/h2>\n<p>If you have several outstanding loans, all with varying interest rates, it\u2019s possible that an outlier could be costing you. Say, for example, a car loan you took out in your younger years \u2014 when you were still <a href=\"https:\/\/www.creditrepair.com\/blog\/credit\/what-is-the-best-way-to-start-building-credit-if-i-have-none\/\">building credit<\/a> \u2014 has a higher interest rate than your other loans. That one blemish on your lending history is likely costing you over time.<\/p>\n<p>In this instance, a balance transfer to a low-interest loan, or low APR credit card, could help balance out high interest anomalies, and reduce debt.<\/p>\n<h2>Debt consolidation methods<\/h2>\n<p>There are several ways to consolidate debt, and picking the right method is important to maximizing savings. Here are a few of the most popular approaches to debt consolidation:<\/p>\n<ul>\n<li><strong>Personal loan<\/strong> \u2014 This is the most common method, and fairly simple to implement. All you have to do is take out a debt consolidation loan, transfer outstanding balances, and pay off debt through this one, centralized payment.<\/li>\n<li><strong>Home equity<\/strong> \u2014 If you\u2019re a homeowner, you can take out a loan or line of credit against your home equity. This type of lending is secured by your house, but if you fail to make payments you could put your property at risk.<\/li>\n<li><strong>Credit card<\/strong> \u2014 Credit card consolidation works similarly to the personal loan option. Here\u2019s how it works: choose a low interest card (maybe an introductory 0 percent APR), pay off debt with the card, and then pay off the card. Through this method you are essentially distilling a high-interest loan through a low interest credit card. But make sure you\u2019re aware of the interest rate once the introductory period wears off to ensure that you will still be able to manage the payment on any remaining balance. Some of these offers have interest rates that jump to more than 20 percent once the zero-interest period expires.<\/li>\n<li><strong>401(k0<\/strong> \u2014 A less common, but still effective, version of consolidation is paying down debt through 401(k) funds. Under the pretense that you will \u2014 without a doubt \u2014 reimburse this retirement account, this method is effectively a personal loan where you\u2019re paying yourself interest. The downside? Failure to repay yourself could exhaust your nest egg and lead to further financial issues that follow you into your retirement years.<\/li>\n<\/ul>\n<h2>How credit affects debt consolidation<\/h2>\n<p>In most cases, the success of consolidation is predicated on an improved credit score (compared to when you initially borrowed money). After all, the goal is to transfer high-interest lending to a more favorable account. So, given that an improved credit score can lead to a low interest consolidation loan, how can you effectively <a href=\"https:\/\/www.creditrepair.com\/\">fix credit<\/a> and start consolidating debt?<\/p>\n<p>Start with the fundamentals. Get the help you need, and partner with a <a href=\"https:\/\/www.creditrepair.com\/how-credit-repair-works\">credit repair service<\/a> to boost your FICO score, and improve the efficacy of debt consolidation.<\/p>\n<div><!-- [if mso]>\n<v:roundrect xmlns:v=\"urn:schemas-microsoft-com:vml\" xmlns:w=\"urn:schemas-microsoft-com:office:word\" href=\"https:\/\/www.creditrepair.com\/how-credit-repair-works\/?tid=17193\" style=\"height:40px;v-text-anchor:middle;width:200px;\" arcsize=\"10%\" strokecolor=\"#1e3650\" fill=\"t\">\n<v:fill type=\"tile\" src=\"https:\/\/i.imgur.com\/0xPEf.gif\" color=\"#63A70A\" \/>\n<w:anchorlock\/>\n<center style=\"color:#ffffff;font-family:sans-serif;font-size:13px;font-weight:bold;\">Learn How it Works<\/center>\n<\/v:roundrect>\n<![endif]--><a style=\"background-color: #63a70a; background-image: url('https:\/\/i.imgur.com\/0xPEf.gif'); border: 1px solid #1e3650; border-radius: 4px; color: #ffffff; display: inline-block; font-family: sans-serif; font-size: 13px; font-weight: bold; line-height: 40px; text-align: center; text-decoration: none; width: 200px; -webkit-text-size-adjust: none; mso-hide: all;\" href=\"https:\/\/www.creditrepair.com\/how-credit-repair-works\/?tid=17193\">Learn How it Works<\/a><\/div>\n<div><\/div>\n<div><\/div>\n<p>&nbsp;<\/p>\n<p>Carry on the conversation on our social media platforms. Like and follow us on <a href=\"https:\/\/www.facebook.com\/creditrepaircom\/\">Facebook<\/a> and leave us a tweet on <a href=\"https:\/\/twitter.com\/creditrepair\">Twitter<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Haunted by the ghosts of financial past? If you\u2019re like the 40 percent of Americans who can\u2019t afford to pay bills, something clearly has to give. Whether plagued by high APR credit cards or old loans you can\u2019t afford anymore, past borrowing mistakes have a significant effect on your financial future. Luckily, debt consolidation \u2014&nbsp;if [&hellip;]<\/p>\n","protected":false},"author":36,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[158],"tags":[52,167],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v17.5 (Yoast SEO v18.5.1) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>How to Consolidate Debt the Right Way - CreditRepair.com<\/title>\n<meta name=\"description\" content=\"Haunted by the ghosts of financial past? 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