By consolidating your debt, you can:
- Reduce the amount of interest that you pay
- Make your finances easier to manage by reducing your total number of bills
If you're overwhelmed with debt, this option can really help gain more control of your financial life.
Ways to consolidate
There are a number of ways to consolidate debts. You might consider:
- Low interest credit cards. If you can obtain a low-interest card, use it to consolidate smaller debts (less than $3,000, for example). To save the most, pay it off during the introductory rate period.
- Personal loans. A personal loan offers you a fixed rate and term. If you consolidate your debts with a personal loan and pay it off, then those debts would be eliminated. While you would be able to count on predictable payments, you would not be able to increase the amount of the loan.
- Home equity loan. If you have larger debts to consolidate, you can use your home as collateral to secure an installment loan with a lower fixed rate. Consider a home equity line of credit with an adjustable rate if you’d like to have ongoing access to credit for expenses.
- Refinancing. If you plan to stay in your home for a time, you can use the cash-out option to pay for your debts and enjoy a lower fixed rate. But you'll need to remain in your home long enough to recoup closing costs.
Things to consider
As you choose whether to consolidate your debts, you'll need to:
- Create a long-term debt management plan. Once you've consolidated, you'll still owe the same amount. If you don't pay it off—or if you take on more debt—then you've just added to your debt issues.
- Consider the costs. Loans can come with fees, and if you refinance, you'll have to pay closing costs. So weigh the costs carefully before you decide whether debt consolidation is right for you.
- Have realistic expectations about low interest rates. Low rates go to consumers with good credit. If you're having problems paying your debts, you may not be able to take advantage of the lowest rates.
The bottom line
Ultimately, debt consolidation is your choice. With the right solution and a careful consideration of the costs, you can simplify your finances and save money.
If you want more advice about how to manage your debt, speak to a nonprofit credit counselor. They can provide you with impartial advice about your specific situation.
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Still considering debt consolidation solutions?
The information provided is not intended to be legal, tax, or financial advice. BB&T hopes you find this information useful but we cannot guarantee that it is accurate, up to date, or appropriate for your situation. Financial calculators are provided to assist you in estimating the approximate costs associated with any bank activity. Your actual costs may vary. You should consult with a qualified attorney or financial advisor to understand how the law applies to your particular circumstances or for financial information specific to your personal or business situation.
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