What is debt consolidation, and how it can help you borrow better

2022-8-29

By Sean Hundtofte

It's the perfect storm. American credit card balances continue to climb while prices increase on all our daily needs. The current inflation rate is 7%, according to the Consumer Price Index.

To slow down inflation, the Federal Reserve will likely increase interest rates to make spending more challenging to slow the economy and bring down prices of goods and services.

What about our debts? Americans have four credit cards and a balance of $6,000. Most of us have more debt and feel like we can never get ahead.

For anyone with multiple credit cards with balances, they roll over from month to month; looking into debt consolidation is recommended for better borrowing.

But, what is debt consolidation?

Debt consolidation means you combine your debts into one single loan. These debts are all the same type, e.g. credit cards. You want to consolidate your debts when the new single loan is lower cost than the combined old loans. Consolidation is best with high-interest loans, including credit cards and personal loans to help you borrow better.

What is the benefit of debt consolidation?

Finding a consolidated loan with a lower monthly payment means you’ll have free cash every month Finding a consolidated loan at a lower interest rate and not much longer in maturity means you’ll pay less overall on your debt, i.e. the total amount of payments you expect to make will go down. It's easier to keep track of one loan than many credit cards, or student loans, or …

How do I consolidate my debt? The most common loan consolidation method is combining your credit cards into one personal loan. Combining loans is a great way to borrow better.

You can check rates with national and local banks or use Solve Finance's Debt Optimizer for an easier route to quickly lower the payments on your debts. We automatically match your scenario, shop across 100s of lenders, all to find the best consolidation options for you. Whether you use our tools or not, we always recommend getting at least three quotes for any loan to borrow better.

By Sean Hundtofte

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