Master Debt


Feeling like you have too much debt? You’re not alone, as personal debt is a significant challenge to younger Americans, who increasingly face higher costs of living, larger student loans and rising debt costs.

No matter the source of your financial burdens, there are paths to fiscal responsibility and financial freedom. One strong option: debt consolidation.

What is Debt Consolidation?

Debt consolidation can reduce the number of individual loan payments you make each month when you can pay them down or off with the proceeds of one new loan, with potentially better terms and often a lower interest rate. The idea is to simplify your financial life, help you pay less in interest expenses and work to become debt-free.

Some people have had success using debt consolidation programs to increase their cash flow while paying off higher interest credit cards, student loans, auto loans or small business debt.

A Three-Step Debt Consolidation Process

Consolidate your debt with these key steps:


To determine if a debt consolidation loan is right for you, you’ll need to estimate all of your personal outstanding debts. Grab a cup of coffee or tea and get started:

Check your current credit score. One way to get a free copy (once per year) of your credit score is by visiting The major credit bureaus (Experian, TransUnion, and Equifax) offer them too.

Make a list of all your balances and the monthly payments you make.


Try your own bank first or consider opening an account with the institution from which you are looking to get a loan. Many institutions offer relationship discounts for their own customers. Bring the proper documentation with you, which may include:

  • Employment and income verification (like a recent paystub)
  • Two months’ worth of credit card statements
  • Other outstanding bills (like a student loan or auto loan)
  • Any bills or letters from collection agencies and other creditors

Once you have your documentation in order and know your credit score, you’re better positioned to talk with your banker to help you decide whether applying for this type of loan will benefit you.


If you receive your loan, you can use the funds to pay off your individual debts. Consider paying off loans with the highest interest rates first (usually that’s your credit card debt). Once you’ve paid off the highest-rate debts, keep going down the ladder to pay off debts with lower rates that may have higher monthly payments (for younger Americans, that can usually mean low-rate, high-volume student loans.)

Don’t Make These Debt Consolidation Mistakes

Going back to your old ways: “When you consolidate debt, and you get a lower rate, it can be very tempting to begin spending again,” notes Matthew Coan, a debt expert at Casavvy, LLC, a consumer debt management firm based in Gainesville, Fl. “Debt is a personal battle, and you should focus on habits and lifestyle when you consolidate so that you don’t end up back in the same place.”

Taking a loan with a higher interest rate than you’re currently paying: Make sure the rate on the new loan is less than the current interest rates you’re already paying on your other debts. “In most cases it should be less than those interest rates,” Coan adds. “That will lower the total monthly payment that you have and create a plan for making you debt-free.

If you’re denied a debt consolidation loan, don’t panic. It could be a simple paperwork issue or that your credit score is too low. Just work on correcting the problem. Then re-apply once you’ve made headway. It is important to know that reapplying might impact your credit score.

If you’re a consumer looking to lower your outstanding debt, debt consolidation can provide you with financial flexibility to do more of the things you want in life.

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