Is consolidating my debt a good idea?

It may be, depending on the size of your debt and how dedicated you are to becoming debt-free.

If your outstanding balances exceed your gross income by more than 50 percent, you may want to explore other options such as a debt management plan, according to NerdWallet. If even after consolidating your debt it will take you longer than five years to pay it off, you may also want to explore options other than debt consolidation. In addition, debt consolidation requires a certain amount of self-discipline. You must be willing to devote yourself to paying off your debts and to not continuing to run up balances on your credit cards.

However, if your debt is small enough and can be paid off in a reasonable amount of time, debt consolidation may be a logical choice. By rolling several accounts into one, you may be able to get a lower interest rate, a single manageable monthly payment, and you may be able to pay off your balances faster than if you kept them separate.

While it may be tempting, taking out a payday loan or cash advance to pay off your credit card debts is a bad move. If you own a home, you can apply for a home equity line of credit and use those funds to pay off your balances. You will then only make one monthly payment to the bank that will likely be at a much lower interest rate. Finally, credit cards often offer promotional rates such as 0 percent interest for balance transfers. If you think you will be able to pay off the total amount within the promotional period, this may be a good option. This information is for educational purposes and is not intended as legal advice.

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