There are personal debt consolidation options that allow millions of Americans a way to retake control of their financial future.

Personal Debt Consolidation

There are personal debt consolidation options that allow for millions of Americans in debt, a way to retake control of their financial future.  How?  By combining (consolidating) unsecured debts, like credit cards, medical bills and personal loans into one loan, that can result in reducing debt financing costs. Consumer debt consolidation options can offer a consumer various benefits but other factors should  also be considered before deciding on this option. Here are a list of personal debt consolidation options together with their potential benefits and drawbacks.

What Is Personal Debt Consolidation?

Personal debt consolidation (often referred to as debt management) is a process of combining your unsecured debts into a single, larger debt (loan) with a more favorable interest rate, payment terms and lower monthly payment.  Examples of unsecured debts that can be consolidated include credit cards, personal loans, medical bills and some types of student loans.   The goal of debt consolidation is to improve your financial situation by lowering your TOTAL costs of financing your debts.

Here are the basic things to know about personal debt consolidation:

  • Debt Consolidation Is A Refinanced Loan With Extended Repayment Terms.
  • Extended Repayment Terms Mean Longer In Debt.
  • A Lower Interest Rate Isn’t A Guarantee When Consolidating.
  • Debt Consolidation Is Not Debt Elimination.
  • Debt Consolidation May Increase Your Total Debt Obligations

Personal Debt Consolidation Is Simple

Personal debt consolidation is simple in principle.   You borrow money and pay off your unsecured debts and remain with one, often larger debt, to pay off.  Ideally, this single payment will have a lower interest rate than your unsecured debts, so you’d pay less in interest while paying down the debt.

But deciding where to borrow the money from, and getting approved for the loan or arrangement, is where it gets complicated and each has its pros and cons.

1 – personal Debt counseling

Pros: This typically involves you making a single payment to the credit counseling company, which in turn pays each of your creditors. Sometimes, they can negotiate lower interest rates or monthly payments on your behalf.

Cons: There may be a small fee to get set up as well as a monthly service fee.  Normally you will be required to close your credit cards once paid off.  (Good and bad on your credit report.)

2 – Unsecured Personal Loan

Pros: The interest rate should be lower than your unsecured debts (particularly if you have credit card debts) and you may have several years to pay off the debt resulting in a lower monthly payment.

Cons: Some lenders charge an origination fee (cost) for the personal loan.  If your credit is poor, you might not be approved for a money-saving interest rate loan.


Other Personal Debt Consolidation

3 – balance transfer credit card

Pros: Lender offers introductory 0% rate transfer credit cards.  You can avoid paying interest entirely if you repay your unsecured debts during the promotional period.

Cons: The transfer credit card may have lender fees (fixed or percentage) on the amounts you transfer.  Also, the transfer credit card has a credit limit which may not accommodate all your unsecured debts and fees  You would then not have consolidated all your unsecured debts into one loan.

4 – Secured Personal Loan

Pros: The interest rate on home and auto loans should be lower than your unsecured debts, because they are loans secured by property.   Mortgage interest payments usually offer personal tax advantages as well.

Cons: While the lender has less risk extending you a personal loan due to the property collateral, you may need good credit to qualify for a low interest rate. If you’re unable to pay off the personal loan, you risk losing your home or vehicle.  Taking out a secured loan to payoff unsecured loans is of high risk and probably not a good decision.

5 – Loan From Family/Friend

Pros: There’s no credit check.  You may be able to get a lower interest rate and repayment terms than a financial institution will offer you.

Cons: You place your personal relationship and family/friend’s finances at risk if your are unable to repay the loan.

Personal Debt Consolidation Reality

Simply put, when you consolidate your debts , you are only treating the symptoms of your money problems.  You don’t get to the core of why you have financial issues in the first place.  You don’t need to consolidate your bills, but rather you need to delete them by paying them off.  To do that, you have to change the way you view your life and the need for debt.

The solution isn’t a magical, quick fix.  They don’t exist.  It likely won’t come in the form of a better interest rate or another loan.  Rather you need to radically change your thought and manner of dealing with debt.  You need to make a plan for how you manage your money and that requires personal discipline.


Personal debt consolidation options allow for millions of Americans in debt, a way to retake control of their financial future. By consolidating unsecured debts, this can result in reducing consumer debt financing costs.

An overview of personal debt consolidation and options are recommended based on their pros and cons. These include 1) Personal Debt Counseling; 2) Unsecured Personal Loan; 3) Balance Transfer Card; 4) Secured Personal Loan and 5) Loan From Family/Friend.  Finally, comments about the reality of consumer debt consolidation to help you get out of debt and on the path towards financial freedom.

Have a comment or question? We welcome your feedback, so just jot it below. And, if you know someone that might benefit from this article, please send it along via your favorite social media channel. For additional information on how to regain control of your financial situation, please Contact Us for a free, no obligation consultation.

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Revised:  2019-07-31

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