There is no one-size-fits-all approach to consolidating debt.

And with so many different types of debt, it can be very confusing to find a consolidation tactic that fits your financial situation. Here are a few tips to help make the process a little smoother, and to get you out of debt more quickly.
  1. Review the interest rates on your existing debts. Credit cards and unsecured personal loans usually have higher interest rates than other forms of secured debt like a mortgage, home equity loan or an auto loan. If you find your rate on a home equity line of credit is less than the rates on credit cards, other personal loans or auto loans, borrowing through that line of credit may save you money.
  2. Even if you have not borrowed the maximum allowed for your credit card, paying down your balance should be one of your top priorities.
    • Pay more than the minimum on your credit card balance. Interest rates charged on most credit cards are usually much higher than those found on other loans.
    • Making your credit card payment as soon as you get the statement will help reduce the interest you are charged.
    • Minimize your credit card usage for a period. Along with not subjecting higher balances to interest, using cash may help you identify ways to spend less.
  3. Evaluate your borrowing capacity available through a mortgage or a home equity loan.
    • Home equity: Borrowing through a shorter-term home equity loan will probably lower your interest rate, but most home equity loans have variable interest rates.
    • Mortgage: If you have a large amount of high interest rate debt, increasing the size of your fixed rate mortgage by refinancing (even if you end up with a slightly higher mortgage rate than what you currently have) may result in lower overall interest costs.

The interest you pay on your mortgage or home equity loan is also tax deductible if you itemize your deductions.

When considering consolidating your debt, use common sense. Remember that borrowing money means you have to repay it. If your borrowing is too high, take immediate steps to reduce it. Every dollar of debt reduction will translate into less interest you have to pay and more money in your pocket. For help managing your debt, visit with one of our experienced bankers. We’re here to help you take the next steps toward debt reduction.