Life has a strange way of leading some people into huge piles of debt. And when most individuals are faced with what seems like an insurmountable task of paying it down, they look for ways of making that chore easier. One very popular, and highly legitimate, way of doing that is through debt consolidation.

So, what exactly is debt consolidation, and is it appropriate for your particular debt situation? Read on to find out!


Given today’s economic situation, taking on debt sometimes is inevitable. There are Credit Card installments, Student Loan repayments, Mortgage loans and car loans. And many people are increasingly turning to Pay Day loans as their last line of defence to make ends meet.

Sadly though, many Americans are carrying more debt today than any generation in the recent past. According to a survey conducted by NerdWallet, average American households carry $15,762 in credit card debt, and a total debt burden of over $130K.

While many in the lending industry try to make a distinction between “good debt” and “bad debt”, the one fact about debt that you should always remember is this: Any debt that you can’t payback easily is bad! 


When you have reached the limits of trying to juggle your debt repayments – multiple lenders, multitude of bills, varying interest rates and maturity dates – it becomes tempting to consider debt consolidation. So what exactly is debt consolidation?

It is a process whereby your bank or financial institution gives you a loan, which is then applied to repay all of your existing debt. Proponents of debt consolidation sell it as a way to take on a single (large!) debt to make all of the multiple (smaller!) debts “go away”. Sounds enticing? Did I hear you say “Sign me up!”? 

Not so fast!


While debt consolidation may sound very tempting, it may not necessarily be right for you. Here’s what you need to know if it makes sense for your particular debt situation, and smart ways to go about it:

  • Do the Math: While the consolidated debt rate may be lower than the individual debt you owe, because of the longer duration over which you will be paying that “single debt”, you could end up making more (in dollar terms) interest payments than you would with multiple debts
  • Use your negotiation skills: If your current debt situation is due to a one-time or unavoidable circumstance, you may be able to negotiate directly with your creditors to ease your repayment without penalties.  Directly dealing with the situation may help save you hundreds, if not thousands, of dollars in consolidated debt interest payments
  • Check your monthly payments: If the consolidated debt results in a significantly high, or marginally lower, monthly payment compared to the total monthly payments for multiple invoices, then debt consolidation may not be worth it. You may as well tighten your belt just a bit, save that “marginal” amount, and use it to accelerate your normal monthly payments
  • Assess your future plans: Having dealt with your debt situation (or brought it under control), do you plan to be more diligent in taking on new debt? If the answer is “No!”, then debt consolidation won’t really help you – it will be a rather expensive short-term band aid for a terminal condition.   

If you are drowning in debt and need temporary reprieve before you take charge, then debt consolidation may be worth considering. However, supplement it with a dose of debt counseling for better results! ​


Debt consolidation loan providers are in this “game” to make money – NOT to save you some! If, over the life of the “single debt”, you end up paying significantly more than you would have paid over the life of each of the “smaller debts” combined, then debt consolidation is not for you. You’d be better off putting a little extra effort into managing all of those smaller debts, and try to pay them off as quickly as you can.

At the end of the day, once you are debt free, the smartest move for you is to never over extend yourself with debt, and make sure you repay anything you owe quickly – before it gets out of control.  

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