3 Top Ways To Consolidate Debt

Debt consolidation means combining debts into one. The biggest advantage is having one single, manageable payment. There are other benefits too, including:

• You can have a lower interest rate, if you qualify.

• You'll know when your payoff dat is.

• By making on-time payments, you could see a boost to your credit score.

If you want to start on your debt-free journey, try these three ways to consolidate debt so that you're ready.

Key Takeaways

• Debt consolidation simplifies your payments by rolling multiple balances into one, often at a lower interest rate if your credit qualifies. You get a clear payoff date and can boost your credit score by paying on time.

• A debt consolidation loan is one option, but cutting unused subscriptions and starting a side hustle can also free up cash to wipe out balances faster. Even trimming $50 a month in subscriptions saves around $600 a year.

• Start by listing every debt you owe, checking your credit score and comparing loan offers before you apply. Set up autopay so you never miss a payment and avoid racking up new card balances after consolidating.

Summary generated by AI, verified by MoneyLion editors

1. Apply for Debt Consolidation Loan

A debt consolidation loan is a personal loan that you use to pay off all your existing debts. You then repay the loan in fixed monthly installments over a set period of time. The interest rate on a debt consolidation loan is usually lower than the average rate of your other debts, especially if you have good credit. This means you can save money on interest and pay off your debt faster.

However, not all debt consolidation loans are created equal. Some lenders may charge high fees, impose strict eligibility criteria or offer unfavorable terms. That’s why you need to shop around and compare different offers before you apply for a debt consolidation loan.

What you should do:

1. Take note of all your debts.

2. Do a check-up on your credit score.

3. Shop around for different loan offers.

4. Use the loan to pay off your debts.

5. Set up autopay so that you stay on top of your payments.

Another one of the easiest ways to consolidate debt with a loan is to use MoneyLion’s personal loan finder tool to find and compare the best offers for you. MoneyLion connects you with lenders who offer personal loans for all kinds of purposes, including debt consolidation.

You can compare different loan options based on

• Your estimated credit score

• Income

• Desired loan amount

You can also see each loan offer’s estimated monthly payments, interest rates, and fees. This way, you can find the most affordable and best debt consolidation loans for your needs.

2. Get Rid of Subscriptions You Don't Need

Another way to consolidate your debt is to reduce expenses and free up more cash flow to pay off your debt. One of the easiest ways to do this is to stop unwanted monthly subscriptions from draining your bank account.

For example, if you're spending $50 a month on subscriptions, cutting that out saves you around $600 a year.

You might be surprised by how many subscriptions you have that you don’t use or need. These could include streaming services, magazines, gym memberships, online courses or software tools. While these subscriptions may seem cheap individually, they can add up to a significant amount over time.

To stop unwanted subscriptions, you need to review your bank statements and identify all the recurring charges you’re paying. Then, you cancel the ones that you can live without. 

By stopping unwanted subscriptions, you could save hundreds of dollars annually and use that money to consolidate your debt with a lower interest rate.

3. Boost Your Income With Side Hustles

The third way to consolidate your debt is to boost your income and earn more money to pay off your debt. One of the best ways to do this is to start a side hustle that can generate extra income.

A side hustle is any activity you do outside your main job to earn extra money. It could be something related to your skills, hobbies or passions.

Some side hustle examples:

• Start a blog

• Sell crafts on Etsy

• Tutor students online

• Deliver food with UberEats

• Or pet sit with Rover

The key to finding a successful side hustle is to choose something you enjoy doing with a high demand in the market. You must also be consistent and dedicated to growing your side hustle and earning more money.

By starting a side hustle, you can increase your income and use it to consolidate your debt faster.

Here's a Tip: Put Down the Credit Card

It sounds crazy, but it works. These are called “commitment devices,” and they help you stick to your long-term goals, according to Rebecca Rouse, who runs the Financial Inclusion Program at Innovations for Poverty Action, a nonprofit that studies debt repayment.

Now, the advice "don't use your cards" doesn't necessarily mean don’t close your accounts. That could hurt your credit. You should use your card for a small purchase every few months—and pay it off right away—to keep the account active and your credit intact.

Plan Ahead Now, Save a Ton Later

As you can see, there are ways to consolidate debt that everyone can adopt. You’ll be amazed by how much money you can save with just a little planning, a few clicks, and a little help from MoneyLion. Knowledge is the first step, and now you’ve got that covered. 

Consolidate Debt

You do have rights! The Fair Debt Collection Practices Act (FDCPA) protects your rights when it comes to when and how a creditor or collection agency can contact you. Find out more about your rights under the FDCPA.

FAQs

How does credit card debt affect my credit score?

Factors like having a large amount of total debt, or late or miss payments can have a negative impact on your credit score. If you feel like your credit rating is being brought down by your debt, give us a call to learn about how Credit Builder Plus could help raise your credit score.

Will debt consolidation hurt my credit score?

Consolidating your debt with a personal loan for debt consolidation can help and/or hurt your credit score. When you use the loan to pay off your credit cards, you lower your credit utilization, which measures how much of your credit limit is tied up. Lowering credit utilization can help your credit.

On the other hand, applying for a personal loan typically requires a hard credit check, which can temporarily ding your credit score. And if you turn around and rack up new credit card debt, your credit score could suffer.

Making late payments on your new loan can also hurt your credit score, while on-time payments can help.

Ultimately, if you use the debt consolidation loan to pay off your debts and then pay off the new loan on time, the overall effect on your credit could be positive.

Key Terms

• Debt consolidation: Debt consolidation means combining multiple debts into one new account or loan so you have one payment to manage, and you may lower your interest rate.

• Debt consolidation loan: A debt consolidation loan is a personal loan used to pay off existing debts, then repaid in fixed monthly payments over a set term.

• Credit utilization: Credit utilization is the share of your available revolving credit you're using. Lower utilization can help your credit score.

• Hard credit check: A hard credit check happens when a lender reviews your credit for a loan application. It can cause a small temporary drop in your score.

• Debt management plan: A debt management plan is a structured repayment program, usually set up through a credit counselor, that combines unsecured debt payments into one monthly payment.

Sources:

• Equifax:

• What Is Debt Consolidation?

• Experian:

  What Is Credit Utilization Rate?

• Consumer Financial Protection Bureau:

  What is a hard inquiry?

• Federal Trade Commission:

  How to Get Out of Debt