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Is Debt Consolidation Right for Me?

If you are tackling several debts at once, especially credit card debt, it may be a good idea to consolidate. Debt consolidation allows you to roll multiple debts into a single payment and, dependent on your financial situation, may give you a lower interest rate. There are pros and cons to consolidating debt, so it’s important to consider all the criteria and determine how it might impact you and your financial goals.

How does debt consolidation work?

Debt consolidation can be accomplished either through a 0% interest credit card or a debt consolidation loan. Both options concentrate your debt into one monthly payment.

  • A 0% interest credit card allows you to transfer all your debts to the card and pay the balance in full during the promotional period (typically 12-24 months). If you don’t pay it off during the promotional period, you will start to accrue interest. You will need good credit to qualify and the amount you can transfer is dependent on your approved credit limit.
  • A debt consolidation loan allows you to use that borrowed money to pay off your debts, then pay back the loan over a set period. You don’t necessarily need good credit to qualify, but higher scores will likely result in lower interest rates.

When considering debt consolidation, you’ll want to add up all your debts and determine how much you owe in total, then calculate the average interest rate. This will help you compare interest rates to that of your debt consolidation loan options.

Should you consolidate your debt?

Depending on the type and how much debt you have, the length of your payment terms, your interest rates, etc., consolidating may or may not be the right option for you. Let’s weigh out the pros and cons.


  • It can help you save with a lower interest rate. If you have high-interest debt on two credit cards, for example, you can combine those two balances into a consolidation loan with a much lower APR. Loans also have a set period in which they must be paid, giving you a deadline for your debt.
  • You may be able to lower your monthly payment by spreading them out over several years rather than paying minimum credit card payments every month that continue to accrue interest. Interest on consolidation loans is not compounded.
  • It can help improve your credit score if you take out a loan and leave consolidated accounts open but unused. It increases your total available credit and lowers your credit utilization ratio.


  • Based on your credit score and your qualifications, you may not be able to receive a lower interest rate on the loan compared to that of your existing debt. Plus, if you extend the repayment terms, you’ll pay more interest over time.
  • If you’re not careful, you can add more debt to your plate. Consolidating credit card debt makes those accounts usable again, which will increase your debt if you do use them. Consider this if you have excessive spending habits.

If your debt load is small, you are likely better off paying the debt as is — consolidating probably won’t save you that much in the long-run. Additionally, you should only consider debt consolidation if your total amount of debt is no more than 50% of your gross monthly income (including rent or mortgage).

Ask for help!

If you feel like you’re drowning in debt and there’s no way out, don’t panic. Debt consolidation may be the right move for you. This is where it’s helpful to speak to a professional so they can help you calculate your total debt and determine if consolidating would help you save. At Republic Bank, we have a team of experts that can help you make those tricky decisions. Give us a call at 800-526-9127 for more information!

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