3 Ways to Consolidate Debt -- and Make It Cheaper to Pay Off

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Juggling a bunch of debts? Here's how to make them easier and less expensive to get rid of.

You may have debts hanging over your head because you lost your job for a time and couldn't keep up with your bills. Or maybe you racked up medical debt and are trying to manage that plus a few credit card balances.

No matter the situation, one debt is tricky enough to deal with on its own. But if you have several debts -- say, multiple credit card balances or a combination of credit card debts and loans -- it can be even more difficult. Here are a few options for consolidating your debt -- and lowering the interest rate so it costs you less.

1. A balance transfer

With a balance transfer, you move your existing credit card balances onto a single card with a lower interest rate than what you currently pay. Some balance transfer cards, in fact, come with a 0% introductory rate -- if you pay off your debt before that intro period ends, you won't rack up any more interest. To get the best balance transfer offers, you need good credit. If your credit isn't so great, you can still do a balance transfer, but you may get stuck with a higher interest rate on your new card.

2. A personal loan

With a personal loan, you can borrow money for any reason. If you're paying off a medical bill and also have a few outstanding credit card balances, you can take out a personal loan to cover all of that debt. The great thing about personal loans is that they're repaid in equal installments, so your payments on your loan are nice and predictable. As with a balance transfer, the better your credit score, the lower the interest rate you can expect. But there are personal loans specifically designed for borrowers with lower credit scores, too.

3. A cash-out refinance

With a cash-out mortgage refinance, you borrow more than your existing mortgage balance. You can use the excess cash for any purpose. A cash-out refinance is actually a good way to consolidate and pay off debt, and given today's low refinance rates, you might save a bundle compared to what a credit card or personal loan would cost you.

To qualify for a cash-out refinance, you need decent credit and enough equity in your home. Equity is the portion of your home you own outright. If you owe $100,000 on your mortgage and your home's current market value is $150,000, that leaves you with $50,000 worth of equity. If you want to do a cash-out refinance of, say, $120,000, that wouldn't be a problem, provided your credit score is high enough.

Consolidating debt can make it easier to avoid scenarios like forgetting to make a payment and dinging your credit score. And it can save you money. It pays to explore these options for consolidation and figure out which one makes the most sense for you.

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