Updated Oct. 4, 2022, at 10:05 a.m. CT
When you’re struggling to get out from under debt, any amount of payment relief can be a weight lifted off your shoulders.
When used correctly, debt consolidation can help you pay off those loan balances and free up cash flow.
People tend to look into debt consolidation when their bills have gotten to a point where it’s too hard to keep up with the payments.
What is debt consolidation?
Debt consolidation, also known as loan consolidation, rolls multiple debts into one loan—often providing a lower interest rate, lower monthly payment and the convenience of making only one loan payment each month.
Debts might include:
When used correctly, debt consolidation can be instrumental in helping you regain control of your debt and your budget.
How do you consolidate debt?
Debt consolidation isn’t one-size-fits-all.
At Dupaco, you can request a free Money Makeover to determine whether this route makes sense for you. Dupaco specializes in thrift and wants to help you save money!
Debt consolidation might take the form of a:
- Balance transfer: You might be able to save money by transferring credit card balances to a Dupaco Visa credit card.
- Debt consolidation loan: If you own your vehicle, you might be able to use it as collateral to get a better interest rate.
- Home equity line of credit: When you have equity in your home, you can consolidate debt with a low-interest home equity line of credit or home equity loan. (Many people don’t realize what an asset their home is, and it can be used to get them out of tight spaces if they have the equity built up.)
When doesn’t debt consolidation work?
This approach should be avoided if it won’t save you money.
Sometimes people get excited thinking that life would be easier if all their debts came on just one bill. But you might be paying a higher interest rate by consolidating it.
Make sure you know what you’re paying now and what you’ll be paying after a consolidation.
How does debt consolidation impact credit?
The trick to getting the most out of debt consolidation is keeping your old credit cards open—and not using them.
If you can do this, you can increase your available capacity and improve your credit score.
Creating a budget will help you see where you are spending and keep you on the right track.
If you start using old credit cards, you take on more debt, which can negatively impact your credit score.
A free Money Makeover is a great way to create a plan that you can hold yourself accountable to.