Debt consolidation can be an extremely confusing, overwhelming process. Getting out of debt is already complicated, but it’s particularly so for people who have multiple debts that can be difficult to keep track of. Consolidating debt is one way to make it easier to get on better financial footing, but it can be a complex task to take on yourself.

1. Create a Money Management Plan 

Debt consolidation won’t help your financial situation if you continue to mismanage your money. Stop spending on your credit cards, and make a budget you can stick to. Be realistic; don’t try to pare down to only the essentials and leave yourself nothing for your hobbies, interests, and unexpected expenses. You want to set yourself up for success by accounting for spending money that can be used for unplanned fun, or saved for expenses that don’t occur every month, such as the holidays or vehicle registrations. 

2. Make Sure Debt Consolidation Won’t Have a Negative Impact on Your Credit Score 

Occasionally, but not always, consolidating your debt has a negative impact on your credit because it may mean closing the oldest line or lines of credit, which may (or may not) create a net negative impact, despite allowing you to pay off your debt easier. A good rule of thumb is to avoid consolidating either very small debts, or large ones that will take over five years to pay off. Since your credit score is a combination of many factors, there is no hard-and-fast rule about whether a particular debt will be more beneficial to keep rather than consolidate, so it is up to you to evaluate each one. 

3. Avoid Putting Yourself in a Worse Situation 

Sometimes, consolidating your debt can put you in a worse situation than if you simply stopped using your credit cards and paid off your old debt. You do not want to consolidate your debt with a high-interest loan, payday loan, predatory secured loans, or high-interest credit card. Retirement loans are an option for some, but if possible they should also be avoided due to the risk of incurring a large tax bill if you’re unable to pay. Be sure to read all of the terms and conditions to ensure that you are making a good choice for your unique financial situation. 

4. Compare Debt Consolidation Products You Qualify For  

Don’t commit to the first debt consolidation product you qualify for. Shop around to make sure you’re getting the best rates, and always read the fine print so that there are no surprises down the line. Balance transfer cards and personal loans often have interest rates that are dependent on your credit score. In addition, some cards or loans have interest rates that skyrocket after just one late payment. 

5. Don’t Be Afraid to Ask for Help 

If you are unsure which option is the best one for your unique situation, it’s always a good idea to ask for help. Many factors can make an option that is good for one person a bad idea for another, including their credit score, total amount of debt, legal standing, and income. Surprisingly, sometimes it’s better to simply file for bankruptcy. If you’re trying to ensure that you are choosing the best option, you may need to consult with a professional. 

Debt Consolidation Specialists 

If you are having difficulties choosing or understanding your options, you may want to consider speaking with a debt consolidation specialist. Debt consolidation specialists are very well-versed on how to choose which options are best for your specific situation, and they are able to create a plan that best fits your debts, income, and credit score.