TULSA, Okla. — As bills pile up, figuring out a way to keep ahead often feels overwhelming, especially when bills come with high interest rates pushing up what you owe.
Staring at a mountain of bills each month is stressful, but consolidating some bills may ease the pressure.
Debt consolidation means combining multiple debts into one single payment.
Instead of juggling several credit card and medical bills with different due dates and interest rates, consider taking out a personal loan to pay them all off. It leaves you with one monthly loan payment for a fixed length of time and usually at a lower interest rate.
"The personal loans are pretty easy product to get approved for. Average rates are typically much lower, about a little above 12.5% compared to the 20% credit card rates, and you could pick a repayment period from one to seven years and just once it's paid off, it's done," said Denny Ceizyk, senior loans writer at Bankrate.
A lower interest rate means more of your payment goes toward the actual debt instead of interest.
Student loan consolidation requires careful consideration
Consolidating student loan debt can be trickier, according to Ceizyk.
"The only way to really consolidate federal student loans is with the federal, the direct consolidation program, and you know, the only drawback to that program it is based on a weighted interest rate, so you don't really get interest rate savings with that program," Ceizyk said.
The benefit is you keep the hardship protections of the federal student loan program and can spread payments out over up to 30 years.
If you don't need those protections and want to pay off student debt faster and have a really good credit score, you may be able to save some money by consolidating your student debt into a private loan with a lower interest rate and quicker repayment schedule.
"Those rates can be substantially lower than a federal student loan program, but unfortunately you'll lose some of those protections, those hardship protections in the event that you do that," Ceizyk said.
Medical debt consolidation options
For medical debt, the approach depends on how many different debts you're dealing with and whether the offices where you have the medical debt will work with you.
"If it's just getting too overwhelming, the other option is to look at just another loan to just replace it all. So, an unsecured personal loan," Ceizyk said.
"That's usually a good place to start if you just need to have a predictable payment and yet consolidate all of those medical debts so you're not trying to track who gets paid what and when," he said.
Important considerations before consolidating
Debt consolidation isn't right for everyone. You need good enough credit to qualify for a lower interest rate. If your credit score is low, you might not get a better deal.
Some people consolidate their debt but then start using their credit cards again. That means they end up with the new consolidated loan plus new credit card debt. Financial experts say that's the biggest mistake people make.
Before you consolidate, add up all your current debts and look at the interest rates. Then compare that to what a consolidation loan would cost you. Make sure you're actually saving money and have a plan to avoid taking on new debt.
"Credit cards, the negative effect is the negative effect they have on your credit scores, and credit scores are tied to so many different things now, including homeowners insurance and auto insurance," Ceizyk said.
He adds, reducing credit card debt down to zero as much as possible with replacing it with installment loans like personal loans can create a big benefit for any future credit decisions and create a big benefit for credit scores.
If you're struggling with debt, consolidation could be a helpful tool. But it's not a magic solution. The key is changing your spending habits so you don't end up in the same situation again.
"This story was reported on-air by a journalist and has been converted to this platform with the assistance of AI. Our editorial team verifies all reporting on all platforms for fairness and accuracy."
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