Most of us can relate to the fact that in adulthood, we feel like we have a lot of irons in the fire.

Some days, we get to the frustrating realization that something has to give in order for us to simplify and regain focus before we drop the ball. 

When it comes to our finances and maintaining our budget, simplifying could come in the form of debt consolidation.

That is, we can merge many of our accounts into one payment by taking out a personal loan or performing a balance transfer on a low-interest rate credit card.

It can save us the frustration of managing payments, the time it takes to pay off those debts, and the accrual of interest on each account over time.

But before you dive into the multiple ways you can consolidate debt, it’s useful to consider what not to do. 

Don’t continue to use your credit cards

Often, it’s our behaviors that need the most work- not the lightning fast payoff that we so desire.

Although consolidating has its perks, ask yourself how you got to this point where you feel you need to consider it. 

Most of the time, we have a strong desire to clean up our finances and simplify them to stay on track. But if we aren’t addressing the spending habits we have, we may find ourselves doing this again and again.

If you take out a personal loan that consolidates all of your payments into one, by allowing for the payoff of your current credit cards, your accounts are still technically active.

It’s important that you set those cards aside and not use them as you pay on your consolidated loan. 

Think carefully before wrapping debt into your home loan

You may feel it’s a good idea to move your debt into your home loan by refinancing and extending your mortgage. 

If you’re planning to aggressively pay off that mortgage by putting additional money toward it every month going forward, it could be an option.

However, consider the length of the mortgage and the interest rate at which you financed it.

You’ll likely find that even with a lower interest rate, unless you pay off your mortgage at a rapid pace, you’ll end up with less interest paid if you simply take out a consolidation loan that has a repayment plan of a few years. 

Consider all the fees

Consolidating debt is about peace of mind, but it’s also about the bottom line, right?

You’re looking to pay off your debts in one fell swoop, then focus on making one lump payment monthly so your financial focus can be restored. But you’re not looking to take accounts with average interest rates just to consolidate them with a loan that comes packed with application fees, monthly fees, and early payoff penalties. 

When you are looking at your options, be vigilant about how you are going to get the most beneficial consolidation option for yourself.

It’s much more exciting to reduce your overall interest rate, reduce the amount of payments you have to keep track of each month, and keep as much of your hard-earned money for your financial well being.