Let’s say you have ,000 in unsecured debt, including a two-year loan for ,000 at 12%, and a four-year loan for ,000 at 10%.
In any case, the best option for you depends on your credit score and profile, as well as your debt-to-income ratio.
» MORE: 4 ways to consolidate debt Success with a consolidation strategy requires the following: To begin to assess your chances with consolidation, first add up all your unsecured consumer debts: credit card balances, medical debt and personal loans.
More When consolidating debt, balance transfer cards let you shift over debts from other cards and charge no interest for a limited time.
Personal loans allow you to pay off your creditors yourself, or you can use a lender that sends money straight to your creditors.
It’s typically considered for people who have high consumer debt.
But most of the time, after someone consolidates their debt, the debt grows back. They still don’t have a game plan to pay cash and spend less.More Two additional ways to consolidate debt are taking out a home equity loan or 401(k) loan.However, these two options involve risk — to your home or your retirement.Consolidation isn’t a silver bullet for debt problems.It doesn’t address excessive spending habits that create debt in the first place.You will now pay ,080 to pay off the new loan versus ,392 for the original loans, even with the lower interest rate of 9%. Get an extra job to bring in more money, and start paying off the debt.