debt consolidationDebt can be easy to accumulate. An unplanned shopping spree here, a gas fill-up there and an expensive mechanical problem with your car to top it all off. It’s typically much easier to swipe your credit card over using cash or even a debit card. Or maybe you’re dealing with a different type of debt. Perhaps you took out loans for each semester you were in college, and now you’re paying multiple loans with multiple interest rates and monthly payments.

Whatever the case, the convenience of swiping a credit card or signing on the dotted line for a loan can be a double-edged sword if a repayment isn’t completely planned out. Those unpaid charges and balances snowball and can suddenly pile up into the thousands. Add a high interest rate to the mix, and you’ve got yourself a recipe for an avalanche of debt.

While it’s true that serious debt may have equally serious repercussions for your finances in the long term, you don’t have to resign yourself to a future of financial ruin. One option to resolve your debt is debt consolidation, which lumps various high-interest debts into one balance with a lower monthly payment.

What are the benefits of debt consolidation?

So, what is debt consolidation, exactly? Broken down to its most essential form, it’s a way to restructure your debt by rolling the loans or credit balances owed into one monthly payment. Because you’ll be paying one interest rate on the amount owed, your monthly payment will usually be lower.

The issue with multiple cards and loans is that you’re typically going to see large amounts of your monthly payments being eaten up by interest charges without seeing much difference in the principle. When you use debt consolidation, you might be able to diminish the total amount of interest you’re on the hook for by locking into one interest rate or even a 0% intro APR period. The result? A lower monthly payment.

One of the benefits of debt consolidation is that it can have a positive effect on your general financial health since you can pay off your debts faster. In simple terms, consolidating your debt makes it less expensive to pay off your debt.

Are there any downsides?

Whether or not consolidating your debt is a good idea depends on your financial situation and the type of debt consolidation you’re considering. For example, if you want to consolidate your debt using a balance transfer card, it’s important to note that not all credit card issuers will allow you to transfer debts other than credit card debts over to a new card.

In addition, if you choose to consolidate your debt using this method, you will want to pay off your debts within the 0% intro period. Otherwise, you’re going to be saddled with the non-intro APR, which might be much higher. Many credit issuers also charge a balance transfer fee between 3% to 5% of the amount you’re moving over to the balance transfer card. While this is a small amount, it adds up if you’re transferring over multiple balances or high amounts. For example, if you transfer $10,000 worth of debt and get charged a 3% balance transfer fee, you’re adding a $300 expense on top of your debt. The best way to determine if this one-time fee is worth paying is by figuring out how much you’d pay with your current credit card interest rate. For example, if you get a balance transfer card with a 15-month 0% intro APR and 3% balance transfer fee, you’ll need to make sure you wouldn’t pay more than 3% in interest over 15 months with your current card — spoiler: you likely will considering credit card interest rates are rather high right now.

Another reason to avoid a debt consolidation is if the interest rate on your debt consolidation loan or credit card is higher than the rates you’re currently paying off. In addition, if you’re not truly committed to lowering your overall debt in the long term, debt consolidation won’t help you. You need to fundamentally change your spending habits and budget to pay down a balance, not add to your debt.

What are the debt consolidation options?

There are a couple of different ways to consolidate debt. One of the easiest ways to get out of debt without paying interest is a balance transfer card. This plan of attack will only work if you have strong enough credit to get approved for a 0% intro interest rate balance transfer card. With a balance transfer card, you can take advantage of rolling all of your debts onto one credit card and paying no interest for the length of the intro period. Just keep in mind that you’ll have to pay a balance transfer fee to transfer your debt, as we previously explained.

Another option is to use a personal loan. This is a good option if you don’t have great credit and your chances of being approved for a balance transfer card are slim. It’s also a good option for those who want to consolidate multiple loans, as a balance transfer credit card is likely not a solution for them. Personal loans can be either secured and require collateral, or unsecured, with no collateral on the line. The main benefits of a personal loan are that the payments are the same each month, so you know exactly what to expect and may be able to manage them better. However, if you have lower credit scores, you might have to deal with a higher interest rate and origination fees.

Is debt consolidation right for you?

If you can no longer make the minimum payments on your credit card or loans, it’s probably a good time to look into your options for debt consolidation. It’s important to confirm it makes financial sense before you decide to use debt consolidation. If the interest rates are higher for a debt consolidation loan than what you’re already paying on your existing loans, you may have to look into other options like government debt-relief options.

Once you have your consolidation plan in place and you’re making payments, don’t fall into the same bad habits that led you there. Remember to follow a budget, stay on top of your bills, set up an emergency fund to avoid overspending with your credit cards — only use it for purchases you know you can afford. With patience, persistence and responsible spending behavior, you can reach financial stability.