If you find that you are behind on your payments, you may be worried that your debt is ballooning out of control. Fortunately, you have options available to you. One option that you may want to explore is debt consolidation. What does this mean? Is this right for you? Take a look at some helpful information below.

What Is Debt Consolidation?

The goal of debt consolidation is to take multiple debts and roll them into a single, recurring payment. If you have multiple debts, you may have a hard time keeping track of them. Furthermore, the higher interest rates could be adding up. Debt consolidation serves two purposes. This can: 

• Make it easier for you to keep track of your debts by consolidating them into a single payment
• Help you save money by taking loans with higher interest rates and reducing them to lower interest rates 

By reorganizing your debt, you can pay it off sooner. Instead of having to worry about multiple payments, various due dates, and numerous interest rates, you can consolidate your debt, saving time and money. 

How Do You Consolidate Your Debt?

There are several ways that you can consolidate your debt. It depends on how much that you have, how many payments you currently have, and what the interest rates are. For example, you may be able to consolidate all of your debt onto a single balance transfer credit card with a 0 percent interest rate. In order to undergo this debt consolidation strategy, you need to have exceptional credit. 

If this is not an option for you, you may want to explore a debt consolidation loan instead. Essentially, you take out one loan, use that loan to pay off your various debts, and then pay back that singular loan over a predetermined term. If you have a high credit score, you may be able to benefit from a lower interest rate. 

When Should You Undergo Debt Consolidation?

There are several situations where debt consolidation might be a good idea. They include: 

• Your credit score is high enough to qualify for a balance transfer credit card or a debt consolidation loan with a low interest rate 
• Your total debt (excluding your mortgage) is no more than 40 percent of your gross income
• You have a steady cash flow that can cover the recurring payment once you consolidate your debt
• You have a firm plan in place that will prevent you from increasing your debt once again 

If you meet these conditions, debt consolidation could be an option for you. 

When Might Debt Consolidation Be a Mistake?

It is important to keep in mind that debt consolidation is not a silver bullet for someone with significant financial issues. For example, it is not going to address spending habits that could have contributed to these problems in the first place. If you take a look at the reduced payments following debt consolidation and you still cannot pay off that loan, then debt consolidation is not right for you. 

Furthermore, if your debt is relatively small and you are going to pay this off in a few months, debt consolidation is probably not worth the time and effort. Instead, you should simply pay off your debt as it is.

Protect Your Financial Health 

In order to protect your financial help, you need to manage your debt appropriately. If you have a significant amount of debt, debt consolidation might be able to help you. If you have questions and concerns about this strategy, you may want to reach out to a professional for assistance.