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When you’re struggling to manage multiple debts, you might wonder if debt consolidation is a good fit for you. It works by combining your multiple payments, and due dates (not to mention the multiple logins you have for each payment) into one convenient monthly payment.

It’s easy to see the potential benefits of consolidating debt, but did you know there are several different ways to consolidate? Find out more on the different methods for consolidating debt and the pros and cons of each. This information can make it easier to choose the right type of debt consolidation.

Personal Loan

A personal loan seems like the most straightforward option for consolidating debt to many people. To consolidate with a personal loan, you usually apply for a new personal loan in the amount of all of your debts combined. If approved, you use the loan funds to pay off your existing debts. Once your other debts are paid off, you can focus your efforts solely on making the payment for your new loan.

Personal loans as a consolidation tool rely heavily on getting better terms for your new loan to be successful. If you get a new loan but the interest rate is higher than your other loans or credit cards, you may not actually save any money. You could potentially even wind up with more debt than before.

Generally, a personal loan is offered by online lenders or traditional lenders like banks and credit unions. They may require you to have good credit in order to qualify for the best terms, including a lower interest rate. People with poor credit may have trouble getting approved for a new loan. Usually, a personal loan is a better option if you have excellent credit and history with your bank to increase the chances of approval.


  • A straightforward way to consolidate debt.
  • Can work well for people with good credit.
  • Lenders like banks provide structure in repayment.


  • Not ideal for people with poor credit.
  • Usually need better terms on the new loan to make it worthwhile.

Home Equity Line of Credit

If you own a home, you could potentially consolidate using your home equity. Home equity lines of credit, also known as HELOCs, are a type of loan that allow you to borrow money against the equity you’ve built in your home.

A HELOC is a revolving credit line, similar to a credit card, that gives you access to credit up to a certain limit. You can usually borrow as much or as little as you need, up to the limit. Interest rates for HELOCs are almost always variable, meaning you may change during the term of the HELOC and you could pay more or less in interest depending on the current rates.

HELOCs could be a good consolidation option for homeowners if they have a decent amount of equity in their home. Additionally, interest rates for home equity lines tend to be less than other types of loans or credit cards.

The biggest drawback to using the equity in your home to consolidate debt is that the credit is secured by your home. If you default on your HELOC loan, you could possibly lose your home. A better choice is usually one that doesn’t require collateral, like a debt consolidation program from a debt resolution company.


  • Low interest rates.
  • Usually have a high approval rate.
  • Stability from a bank or other established lender.


  • Your home is used as collateral.
  • Upfront costs and fees to establish the loan or HELOC.

Credit Card Balance Transfer

Credit card balance transfers are a way to move an outstanding balance on one credit card to a new card with a low or 0% introductory interest rate. Introductory rates usually expire after 12-21 months, so you’ll have a limited time to pay off your consolidated debt before a higher interest rate kicks in.

You’ll likely need a good credit score in order to qualify for credit cards with a low interest rate. If you have less than perfect credit, you may not be approved for a new card. Additionally, you’ll probably be working directly with a credit card company who may not have your best interests in mind. People with lower credit scores or limited credit history should consider other options, like speaking with a debt resolution company to consolidate credit card debt.

You should consider your ability to avoid overspending while trying to choose the right type of debt consolidation. Consolidating with a new credit card may encourage overspending. When you transfer your balances, your existing credit cards will be clear and you may be tempted to max out those cards again.


  • Potentially save on interest costs during the introductory rate period.
  • A good option for those with a relatively low amount of debt and good credit.


  • Not much time to pay off the balance before the regular interest rate takes effect.
  • Need good credit to qualify for the low interest rate offer.

Family and Friends Loan

Some people choose to borrow money from family and friends in order to consolidate debt. Taking out a loan from a friend or family member may seem like the easiest option. You may not have to deal with fees like you might encounter when obtaining a loan from a bank and you’ll probably get a great interest rate.

However, borrowing money from family and friends can be risky. There are usually no terms to the loan, leaving both you and your lender at risk. In addition, if you don’t pay back the loan, your relationship will likely take a significant hit. You may end up losing friends or the support of your family members.

If you’re worried you won’t qualify for a consolidation program, borrowing from trusted friends or family members could be an option. Because this is a more personal lender, getting a written contract that specifies the loan details is an important step so you can be held accountable—just like you would be with a financial institution.


  • Little or no fees to set up the loan.
  • Low interest rates.
  • The ability to potentially customize your loan to your financial needs.


  • No stability from an established lender or debt resolution company.
  • The possibility of ruining a close relationship with friends and family.

Debt Resolution Program

Many people find that having the support of a debt resolution company aids in the success of their debt consolidation. Unlike other types of consolidation, a debt resolution program doesn’t involve taking on new debt to pay existing debt. Instead, debt resolution programs work by negotiating with creditors on your behalf. It’s not uncommon to have your total amount of enrolled debt reduced to a more realistic amount, thanks to the skills of a professional negotiator.

Most programs request you to set up an account before they negotiate with your creditors, and you are requested to make one convenient payment each month into this account. When the account has sufficient funds, the debt resolution company will reach out to your creditors to negotiate a resolution on your behalf.

This type of debt consolidation should give you the benefits of one simplified monthly payment while also helping you avoid taking on new debt. You’ll also have a high chance of lowering the total amount you owe, significantly saving you money. If you’re looking to choose the right type of debt consolidation option, working with an experienced debt resolution company is generally a good choice for almost anyone.


  • Potentially resolve debt for less than you originally owed.
  • Don’t have to take on new debt.
  • Easier to qualify than taking on new debt obligations.
  • Professional debt negotiators work with creditors on your behalf.


  • Some creditors may not be willing to negotiate.
  • You may have tax consequences for successfully lowering your debt.
  • There may be a significant effect on your credit score. However, as you pay down your debt or get out of debt completely, it’s likely that your credit score may increase.

How Do I Choose the Right Type of Debt Consolidation?

Finding the right debt consolidation method for your financial situation is important to the debt resolution program’s success. If you choose the wrong program, you may end up in even more debt.

Remember that many of the types of debt consolidation revolve around taking on new debt. With a debt resolution program from Accredited Debt Relief, you can avoid taking on new debt and still get the benefits of consolidating your existing debts. Our Consolidation Specialists work for you to find the best option for you.

Find out more on how using a debt resolution program to consolidate your debt can potentially save money by getting a free consultation today.

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