Debt Consolidation

You don’t need a loan to eliminate credit card debt. A debt management program consolidates all your credit card bills into one, lower monthly payment at a lower interest rate. You can be debt free in 3-5 years.

Debt Consolidation and Credit Consolidation Programs for 2018

What is Debt Consolidation?

The traditional method of consolidating debt is to take out one large loan from a bank or credit union and use that money to pay off several smaller debts.

That can be effective, unless you have a less-than-perfect payment history and low credit score, which means you may not be approved for a debt consolidation loan or bill consolidation loan, as it is sometimes called. In either case, the loan you get will carry a high interest rate.

But you don’t need a bank loan to consolidate debts.

The debt management program at InCharge Debt Solutions will reduce your monthly payments and interest rates and provide bill consolidation – all without a loan.

InCharge credit counselors work with your creditors and get you a single, predictable monthly payment that you can afford. You choose the day of the month that works best for you based on your personal budget and payroll schedule.

The success rate for people enrolled in debt management programs is 55%. Make on-time monthly payments and you eliminate your credit card debt in 3-5 years.

Consolidating Debt? Here are the Benefits:

One Consolidated Payment

Paying multiple debt payments is hard work. Mail gets lost, life gets busy and the late fees pile up. With the debt management plan, we make it easy. We consolidate debt into one payment.

Lower Your Interest Rates

If you qualify, we may be able to secure lower interest rates from your creditors.

Pay Off Your Debt Faster

How would you like to be debt free within a few years? Each year, thousands of our clients graduate to debt free status.

You Choose the Due Date

Ever feel like you are juggling too many payments with too many due dates? With InCharge’s debt management plan, you can schedule the exact day of the month that your single debit pays all of your debts. This means no more confusion over what needs to be paid when: your debts are all paid with one payment.

Free Financial Education

We can help you become debt free, but how do you stay that way? We’ll teach, motivate and inspire you to stay debt free. Our financial literacy program will teach you how to save money, build an emergency fund and set achievable financial goals.

Which Debts Can Be Consolidated?

The following debts are eligible for InCharge’s consolidation program:

  • Credit card debt
  • Medical debt
  • Past due utilities
  • Unsecured loans
  • Collection accounts
  • Payday loans

Excessive credit card debt – the thing that gets people in the most financial trouble – is the best reason to consolidate debt.

The average interest rates on credit cards in 2017 was 16.06%. The interest rate on debt consolidation loans depends on your credit score, but if your score was above 640, you could get a loan for as low as 7%.

Secured debts such as homes, property and automobiles can be refinanced, but are not considered good candidates for debt consolidation because you are placing a valuable asset at risk. The home could foreclosed or cars repossessed if you miss payments.

Signs You Should Consolidate Debt and Loans

Here are some signs that consolidating loans might be a good idea for you:

  • You are spending more money than you are making.
  • Your credit card balances are growing, not shrinking.
  • The interest payments on your credit card debt is exceeding the amount purchased each month.
  • You’re paying only the minimum payments on your debt, and even that is difficult.
  • You have been turned down for a credit card or store installment loan for having a high debt-to-income ratio.
  • You carry debt on more than 5 credit cards.
  • You are approaching or are at your credit card limits.
  • When bills come in the mail (or email) you dread opening them.
  • You carry a balance on credit cards with interest rates in excess of 18.99%.
  • Your credit score is falling.

How the Debt Consolidation Alternative Can Help You

According to data from the Federal Reserve, approximately 37% of Americans carry a credit card debt balance from month to month. Some people carry small balances. Others carry large balances. You may be somewhere in the middle. Carrying a balance over months, years, decades… adds up. The average credit card interest rate is around 15% APR. That’s $15.00 per year for every $100 you carry in debt. If you have $15,000 in debt, you’d be paying $2250 each year to hold that debt. And that’s only for one year. If you carry that same debt for 5 years, you’ve paid $11,250 to borrow $15,000.

It’s not easy to get out of debt. That’s where debt consolidation comes in. Here’s a scenario to help you better understand traditional debt consolidation. After you’ve read that, we’ll tell you how InCharge’s non profit debt consolidation alternative can capture all the benefits of traditional debt consolidation without the risks.

The Difference Between Good Credit & Bad Credit

Bank: With bad credit, you pay $63.81 more per monthly payment and $3,828.09 more over the life of the loan (24.3% more).

Credit Union: With bad credit, you pay $54.75 more per monthly payment and $3,284.82 more over the life of the loan (21.67% more).

Online Lender: With bad credit, you pay $49.58 more per monthly payment and $2,974.69 more over the life of the loan (20.1% more).

Consolidating Debt and Loans with a High Debt-to-Income Ratio

Anne, 32, was a high school teacher in debt. Anne starting using credit in college to pay for books and expenses. She graduated with a small balance on two cards: $2400. As a new teacher, Anne signed up for 2 more credit cards at her favorite clothing stores to pay for a professional wardrobe, accumulating $2500 more in debt. Over the next few years, Anne experienced a number of financial set-backs. She opened another credit card to help pay for a major car repair ($1500) and another to cover expenses when her roommate moved out with no notice ($2500).

Two years ago, Anne was laid off. As a teacher, she thought she had job security, but her state had a budget crisis and teachers with little seniority were the first to go. She was unemployed for one year and then re-hired the following year. With few options, Anne lived off her credit cards while unemployed, adding an additional $9000 to her debt. At 32, she owes $17,900 on 9 different credit cards. In some 2-week spans, Anne has to make 5 credit card payments.

It feels like a big payment is always due. I try not to look at the finance charges. It’s just too depressing. I can barely keep up.”

Anne is interested in consolidating debts. “Just having one payment to worry about each month would be a godsend.” When she looked into a traditional debt consolidation program, Anne faced a number of problems. Because be she had a very high debt-to-income ratio, she did not qualify for the the best interest rates. There were also high fees associated with taking out a large loan. Then Anne discovered InCharge’s debt consolidation alternative.

With InCharge’s debt consolidation alternative, Anne was able to consolidate all of her payments into one convenient monthly payment, without taking out a new loan. InCharge was also able to help Anne get lower interest rates on 7 of her 9 cards, meaning more of her payment each month would go to pay off the balance, than to interest. With the InCharge debt consolidation alternative, Anne will be debt free in 4 years and 2 months. “Having lived with credit card debt my entire adult life, I cannot tell you what it means to me to be debt free in a few years. Every time I make my one consolidated payment, I know I’m one month closer to my financial freedom.”

Debt consolidation lenders won’t qualify you for a loan if too much of your monthly income is dedicated to debt payments. If you find your debt-to-income ratio in excess of 50 percent, you should consider alternatives to debt consolidation, including consolidating without a loan. If you need help calculating your ratio, check out our article on how to calculate your debt-to-income ratio.
Online Application for a Debt Consolidation Loan

How to Get a Consolidation Loan

A debt consolidation loan can take a lot of the stress out of your financial life by reducing multiple monthly payments to just one payment to a single source.

However, he whole purpose of doing this is to reduce the interest rate you pay on debts as well as the amount you pay every month so it is important that have accurate financial records.

Here is a step-by-step sequence for getting a debt consolidation loan:

  1. Make a list of the debts you want to consolidate.
  2. Next to each debt, list the total amount owed, the monthly payment due and the interest rate paid.
  3. Add the total amount owed on all debts and put that in one column. Now you know how much you need to borrow with a debt consolidation loan.
  4. Add the monthly payments you currently make for each debt and put that number in another column. That gives you a comparison number for your debt consolidation loan.
  5. The next step is to approach a bank, credit union or online lending source and ask for a debt consolidation loan (sometimes referred to as a personal loan) that covers the total amount owed. Ask how much the monthly payment will be and what interest rate charges are.
  6. Finally, do a comparison between what you currently pay each month and what you would pay with a debt consolidation loan.

Your new monthly payment and interest rate should be lower than the total you were paying. If not, try negotiating with your lender to lower both rates. If you’ve been a good customer at that bank or credit union, they may take that into consideration and reduce your rates.

If you still can’t get a lower monthly payment and interest rate than you were paying, call a nonprofit credit counseling agency and investigate another debt-relief option like a debt management program or debt settlement.

Debt Consolidation Alternatives

It is easy to accumulate debt. It isn’t always easy figuring the best way out of it.

Fortunately, there are several options, at least one of which should help you get your finances back on track.

Change your habits

The most effective alternative to consolidating debt is learning to live on less than what you make. In other words, make a budget … and stick to it. Take the time to list income and expenses, then adjust those numbers until the column under income exceeds expenses. There are plenty of easy-to-use apps that should help make this process workable, if you are disciplined about it.

Personal loan

These are relatively easy loans to get from banks or credit unions, but only if you have a good credit score. If you’re struggling, the interest rate they charge might not be much different than the one you currently are paying.

Home equity loan

If you have equity in your house – it’s worth more than what you owe on it – you can borrow against that amount. The interest rates on home equity loans are lower than interest on credit cards, but there is a significant risk here: You could lose the home if you miss payments on this loan.

Home equity line of credit (HELOC)

This is often confused with the home equity loan, but the two differ. A HELOC is a line of credit for a fixed amount of money. You draw from that line as needed, for a fixed period of time, usually 5-10 years. The repayment period starts after that and typically runs 10-20 years. HELOCs often include low introductory or teaser rates that help reduce cost. The interest rates could be fixed or variable, but in either case should be lower than credit cards. New tax laws instituted in 2018 allow for deducting interest paid, but only if the money was used to make home improvements and your total mortgage doesn’t exceed $750,000.

Balance transfers

Many companies offer credit cards that allow you to transfer the balance on your cards to a new one with a 0% interest charge. You must have good-to-excellent credit to qualify for one. The 0% interest is known as an “introductory rate” that expires, typically after 6-12 months. The rates on the cards then jump to between 15% and 25%. There also could be transfer and late fees applied. This could be a dangerous move, unless you are sure you can pay off all your debt during the introductory rate period.

DIY (Do It Yourself)

Start by calling your card company and asking them to lower your interest rate. You also could attack the debt by paying off the card that has the lowest balance first (“snowball” method) and moving up from there. Another option is to start with the one that has the highest interest rate (“avalanche” method), pay it off and go down from there. Either way works, if you make at least the minimum payment on all cards.

Debt Stacking

Debt stacking, also called the “avalanche method”, is a DIY (do it yourself) debt elimination strategy. Start by calling your credit card companies and asking them to lower your interest rate. Then, order your debts from the highest interest to the lowest. Figure out how much money per month you can put toward paying down your debt. Next, pay the minimum balance on all of your credit cards and put whatever money is left toward the debt with the highest interest rate. Once that is paid off, move on to the debt with the next highest interest rate. The idea is that paying off the highest interest rate first will prevent it from racking up interest uncontrollably. That will save you money.

Snowball Method

The snowball method is similar to debt stacking, but instead of ordering debts by interest, order them from the lowest balance to the highest balance. Again, start by calling the credit card companies and asking them to reduce your interest rate and calculate how much money you can afford to spend each month on your credit card debt. Pay the minimum balance on all your cards and use the rest of the money to target the card with the lowest balance. Then, move on to the card with the next lowest balance. This will help you pay off a single debt faster. The theory is that once you see a debt wiped clean, you will be motivated to continue paying off your debt.

Signature Loans

Also called a good faith loan, it is a type of unsecured personal loan that only requires a signature, not a credit check. You would sign a “promissory note” that means you promised to pay back the loan. Because there is no collateral behind it, the interest rate could be very high. Your history with a bank or credit union is one of the reasons they would grant this loan.These are more common in small towns where an individual’s reputation and relationship with a bank might have an influence. It might help a small business owner get through a couple months of bad business, but it could be very difficult to obtain one to consolidate your debts.

Debt settlement

If your bills have reached the stage where there is no chance you can pay the full amount, this is an option. Debt settlement companies can help you reduce the amount you pay by 25%-50%, but it becomes a severe negative mark on your credit report for seven years and will damage your credit score. You also must pay taxes on any amount the lender forgives. Be careful of this, especially if you hope to buy a house or car in the near future.

Borrow from your 401k

Rules vary on this, but usually, you are allowed to borrow up to 50% of your retirement fund to a maximum of $50,000 and pay it back within five years. The interest rate is low (usually prime plus 1%), but there are risks here. There are tax consequences and penalties for withdrawing from a 401k and you lose a lot of the power of compounding interest that helps the account grow. Only consider this as a last resort.

Debt Consolidation vs. Debt Settlement

Debt consolidation and debt settlement are not the same. In fact, they are very different in how they work and the results that should be expected.

Debt consolidation is the process of combining bills from multiple creditors into one large bill and either taking out a loan or using a debt management program to pay it off. Debt consolidation tries to reduce the interest rate on debt and lower the monthly payments to help the consumer gradually pay off all debts in a 3-5 year time span.

Debt consolidation will lower your credit score slightly for a short period of time, but it will rebound quickly – and actually improve – if you make on-time payments.

Debt settlement, by contrast, is an attempt to reduce the amount owed. Ideally, the lenders will accept a lump-sum payment and forgive a portion of the debt, usually somewhere between 25% and 50%. On very small amounts of debt, this could happen in as little as six months to a year, but as the size of the debt grows, it easily could take 3-5 years to settle.

In the meantime, your credit score will fall, perhaps as much as 75-150 points (depending on your original status) because of nonpayment. Once the bill is settled, it remains on your credit report for seven years and has a negative impact on your credit score.

Pros and Cons of Debt Consolidation

Debt consolidation is beneficial to some people, but not everyone. Here is a look at some of the good and bad sides of several types of debt consolidation.

Home Equity Loans


  • Interest rates are lower for home equity loans than credit cards and personal loans
  • Longer loan term (5-15 years) makes monthly payments more affordable
  • Interest rate is not dependent on credit score because the loan uses your home as collateral
  • Interest is generally tax deductible up to $100,000 (subject to change under the Tax and Jobs Act of 2017)


  • If you don’t keep up with your payments and default, your home could be foreclosed
  • There are minimum loan amounts, so you might have to borrow more than you need. Bank of America has a $25,000 minimum and most lenders require at least $10,000
  • Longer loan terms will be more expensive in the long run

Personal Loans


  • Interest rates are lower than credit card rates. According to the Federal Reserve, the average personal loan carries a 10.57% interest rate compared to 14.99% for credit cards
  • A personal loan is a fixed amount over a fixed period of time. Credit card balances are revolving and continue to change, which makes it hard to calculate the cost of interest and when you will finish paying it off


  • No flexibility in monthly payment. Credit Cards have a minimum, while the monthly payment on a personal loan is fixed
  • The interest rate is reliant on your credit score, which could be very low due to credit card debt
  • Personal loans might include origination fees, which is based on a small percentage of the loan upfront, but doesn’t count toward the balance

Balance Transfer


  • No interest for a year or sometimes as long as 18 months, so it gives you time to catch up on payments
  • Combines all your credit card debt into one payment


  • When the 0% interest expires, the new rate might be more than your previous rates
  • Some cards have balance transfer fees
  • Clearing the balance off your other cards, means more credit available and could put you in danger of going deeper into debt

Debt Stacking/Snowball Method


  • With debt stacking, you should pay off your debt quicker and save money on interest charges
  • A specific strategy will help you manage your debt more efficiently, rather than paying here and there when you can


  • You still have multiple creditors with multiple payments to keep track of
  • It’s difficult to tackle debt alone

Debt Settlement


  • You could end up paying less than you owe


  • It is a very risky strategy
  • If you have multiple creditors, you have to negotiate with each one
  • Debt settlement companies ask you to quit paying creditors while they negotiate, which means you will rack up interest and fees in the process
  • Debt settlement is reported to credit agencies and noted on your credit report for seven years, which will drag down your credit score
  • Debt settlement companies charge a substantial fee, usually 20-25% of the final settlement
  • The IRS might count whatever money that is saved during the settlement as income, which would require you to pay tax on it
  • Lenders don’t have to accept a settlement

Borrowing from 401K


  • No minimum credit score required and no loan application
  • Lowest interest rate you can get
  • Repayment is simply taken out of your paycheck


  • The money saved in interest will be lost in multiples in your retirement from the effects of taking money out of a fund that would have been earning compound interest
  • This is money that would have been protected from creditors during bankruptcy. If you continue your financial troubles the borrowed money is already exposed
  • There are tax consequences and penalties
  • You can only borrow from 401K plan if you’re employed by the company that offers the plan
  • Not all 401K plans allow loans

Signs That Debt Consolidation Is a Bad Idea

Debt consolidation is not for everyone. Here are signs that you should consider alternatives:

  • Missing monthly mortgage or rent payments
  • Falling behind on utility bills
  • Maxing out your credit cards
  • Receiving calls from debt collectors

If you aren’t sure whether you can pull yourself out of a financial mess, call a nonprofit credit counseling agency and ask for advice. Be sure the agency’s credit counselors are certified by the National Foundation for Credit Counseling. Ask them to review your assets and expenses and recommend a course of action. The call is free.

If you are not a viable candidate for debt consolidation, they could recommend bankruptcy. Despite its reputation, bankruptcy is not a financial death sentence. It is a chance to start over and with the right direction from a bankruptcy attorney, you could be back on your feet financially in as little as two years.

Debt Consolidation Loan vs. the InCharge Debt Consolidation Alternative

Debt Consolidation Loan

  1. Take out a new debt consolidation loan
  2. Pay high loan origination costs
  3. May be turned down if your credit score is low
  4. Consolidation interest rates may be high
  5. One consolidated monthly payment
  6. New large loan pays off several smaller loans
  7. May not qualify because of high debt-to-income ratio

InCharge Debt Consolidation Alternative

  1. No new debt consolidation loan
  2. InCharge helps you secure lower interest rates with your creditors
  3. One monthly payment to InCharge (InCharge divides it up among your creditors)
  4. No hefty loan origination fees (because there is no new loan)
  5. Interest rates will be lower, in most cases
  6. Access to free debt counselors and support, helping you stay the course to become debt free
  7. Access to exclusive educational material
  8. Referrals to other nonprofit companies that can help you with other problems

Frequently Asked Questions

How Does Debt Consolidation Affect Your Credit Score?

How to Consolidate Debt with Bad Credit?

Should I get a debt consolidation loan to pay off credit cards?

Is it a Good Idea to Consolidate Debt?

How do I prepare for a debt consolidation appointment?

How Nonprofit Debt Consolidation Works

A nonprofit debt consolidation program offers many of the benefits of traditional debt consolidation with few of the negatives.

Learn More

Online Debt Consolidation

You can enroll in an online debt consolidation program, if you qualify through nonprofit credit counseling.

Learn More

Credit Consolidation

Learn the pros and cons of different credit consolidation options including online consolidation loans from Lending Club, Debt Settlement options and nonprofit debt consolidation services.

Learn More

Debt Consolidation Calculator

Would debt consolidation save you money? Use this calculator to find out. Enter your current balances, monthly payments and interest rates under Current Debt Information. Enter the proposed interest rate and repayment period under under Consolidated Loan Information. Push submit. The calculator will show you how much you can save with a debt consolidation loan.


Federal Reserve (2018 January 8) Consumer Credit. Retrieved from

NA, ND. Debt Consolidation. Retrieved from

NA. (2017, September) Average Credit Card Debt in America: 2017 Facts & Figures. Retrieved from

NA. ND. Debt Consolidation Loans. Retrieved from

NA. (2017, September) Personal Loans: Estimated offers for $10,000. Retrieved from

See how much you can save with Debt Consolidation

About the author

Veteran journalist/blogger Tom Jackson has worked for newspapers in Washington D.C., Sacramento, Calif., and Tampa, Fla., racking up state and national awards for writing, editing and design along the way. Tom also has been published in assorted sports magazines, and his work has been included in several annual “Best Sports Stories” collections. Most recently, his blogging for various websites on the 2016 election won a pair of top honors from the Florida Press Club. A University of Florida alumnus, St. Louis Cardinals fan and eager-if-haphazard golfer, Tom splits time between Tampa and Cashiers, N.C., with his wife of 40 years, college-age son, and Spencer, a yappy Shetland sheepdog.