Debt Consolidation

If you’re having trouble paying your bills, you are not alone. Although signs show an upturn in the economy, many Americans are deep in debt, and not everyone can work overtime or a second job to pay down that debt. That's where debt consolidation and other financial options come in.

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What is Debt Consolidation?

Debt consolidation is a widely used term that can imply the use of a number of different debt assistance plans that combine multiple debts, loans or payments. There are three main types of debt relief options available: Debt Consolidation Loans, Student Loan Consolidation, Debt Management Plans and Debt Settlement. When done the right way, debt consolidation can:

  • Lower your interest rates

  • Lower your monthly payments

  • Protect your credit rating

  • Help you get out of debt faster

Debt Consolidation Loans

Consolidating your debts by taking out one large loan or a loan secured against an asset, such as a house to pay off a combination of smaller loans or accounts, is not advised. It uses one lump sum to cover the amount owed on multiple accounts. However, that new loan is now secured. You have just taken an unsecured debt and collateralized it against your home or other personal property. By taking out a new loan, you may qualify for a lower or fixed interest rate and will only be required to make a single monthly payment.

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Debt Management Plans

A Debt Management Plan (DMP) is the preferred method of debt consolidation, which many people choose because they can substitute multiple monthly payments with just one monthly payment. A DMP is a type of payment consolidation that could result in lower interest rates to your creditors. This means that you can make one consolidated payment and have that payment split among all your debtors. Utilizing a debt management plan may not hurt your credit score.

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Debt Consolidation vs. Debt Settlement

For many people, debt consolidation equates to debt settlement, a process of negotiating your debts to ensure lower payments, although the two services are completely different. Debt settlement allows you to make one monthly payment, but that payment isn’t going to your creditors. Instead, an account is built up with enough money to pay off one debt at a time, at a negotiated lower amount. This is commonly considered consolidation because instead of making multiple payments to your creditors, you are now making one monthly payment to a debt settlement company with the intention of negotiating a lower debt payoff.

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Settlement & Credit Card Companies Tip

Looking to consolidate student loans? We can help with that, too.

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How to Consolidate Your Debt

Take Action

Making the decision to take action is the first step. Ignoring your debts will not make them go away; it will make your problems worse. The sooner you address your debts and make a plan to repay, negotiate, or consolidate them, the sooner you’ll be living a life free of debt.

Know Your Options

A debt management plan or debt settlement should be your top options for consolidating your credit card debt, but alternatives include obtaining a debt consolidation loan, borrowing from your retirement funds or the equity in your home, and consolidating your student loans. While you can't consolidate federal student loans with other debts, including private school loans, lending institutions can consolidate private education loans with other sources of debt.

Know the Risks

Financial advisors tend to lean away from turning unsecured debt into secured debt, so utilizing home equity is often not considered the best option. You risk losing some or all of the assets you used to secure the debt. Similarly, you should explore all other options before choosing to withdraw money from tax-free accounts you set up for your retirement.

Need help choosing the best debt relief option for you?

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Walter Pacheco
Managing Editor

Walter started his nearly 20-year journalism career writing about South Florida's gourmet cuisine and shooting the region's best chefs and their gastronomic creations. He covered municipal politics and redevelopment at the Miami Herald for several years before moving to Orlando, where he helped launch the Orlando Sentinel's first Spanish-language publication, El Sentinel. Several years later, he helped develop the Orlando Sentinel's early breaking news team. He covered Central Florida hottest crime news, including controversial stories like the Casey Anthony murder case and the George Zimmerman story on the shooting death of Trayvon Martin. Walter also wrote about the region's technology and social media industry. He is now the managing editor for, providing online readers a community with news about student loans, debt settlements and loan consolidation.


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