How to do debt consolidation efficiently, all by yourself


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Debt consolidation approaches are increasing with the rise of household debts and unsecured debts in our country! But, most of the consumers, who want to do debt consolidation, don’t actually understand how this debt relief process works.

Many who choose to consolidate debts do so with the hope of a better financial future, without knowing the ins and outs of the process. They see the jolly internet ads and the razor-suited financial advisors burping out complex words, like ‘consolidation loan’, ‘credit score boost’, ‘single payment’, and so on, which make them confused.

Plus, many take the help of a consolidation company to become debt-free!  They just seem to be so ignorant of the hidden truth, that you can consolidate debts on your own without taking professional help.

Welcome to this post that we have created exclusively for you, if you want to know what debt consolidation is all about, and how to do it all by yourself without asking for help from third parties.

Let’s begin!

A precise breakdown of debt consolidation as a starter:

Before I brief you on how to go about DIY(Do It Yourself) debt consolidation, let me first introduce you to debt consolidation in the easiest words possible! By consolidation, we mean bringing various components and materials into one place. This can also mean summation.

It’s like instead of keeping $50 in one pocket, $20 in the other pocket, another $30 in the back pocket, you keep $100 in one single pocket! So, with debt consolidation you bring all your debts into one single place, and rather than having multiple debts to keep track of, you only have one amount to chase.

That’s the beauty of debt consolidation. It feels like you are building a new block of bread by joining the slices!

An example would clear it out even more. Suppose you have 1 credit card debt, 1 personal loan debt, and 2 payday loan debts. This allows you to make 4 distinct payments each month for each of your debts.

With debt consolidation, you get to bring in all your debts together and thereby be left with only one monthly payment instead of 4 different ones. But, the issue that you’ve got to deal with is, how can you bring all your debts from different lenders into one place?!

Well, it’s pretty easy actually! Remember poison kills poison! That’s the same case down here. You take out a big debt that covers all the amounts of the debts you plan to pay off! With this new debt, you clear each and every one of your existing debts. Pay them off in full, and kiss them goodbye.

Thus, you are now left with a single amount to pay off, that too at a lower interest rate than the combined average of the existing interest rates. Sounds good? That’s exactly what we call debt consolidation. A process that you can simply do it yourself, and thereby manage debts while keeping your head held high!

But, but, but— there’s one thing that I was just skipping out on. From where will you get this big fat amount, that will wave off your debts? Believe this brings us to our next part:

Best ways to consolidate debts on your own

a. You can take out a consolidation loan or a personal loan:

Taking out a loan to pay off old debts is the most sought after option for DIY debt consolidation. There are many banks and credit unions that offer these loans, especially to customers who are having difficulty paying off debts.

The credit score check and qualification rules for these loans are pretty lenient when compared to other conventional loans. Also, the interest rates on these loans are quite moderate. But, it’s better if you take out a consolidation loan from the bank with whom you have your existing credit/debt accounts.

Banks love to work with existing customers. So, you can expect more decent and favorable loan terms if you take out the loan from the same bank. However, if you plan to take out a personal loan, then you can do so, but remember personal loans are costlier than consolidation loans. I would always suggest going for consolidation loans over personal loans, as loan terms are better with the former.

b. Try balance transfer for credit card debt consolidation:

If all you have is credit card balances to pay off, then it’s better you choose credit card balance transfer.

Unlike a consolidation loan, here you can take out a new credit card or use an existing card of yours that has nil or very low balance. With this card, you will transfer all your existing credit card balances.

By doing so, you will eliminate all your previous credit card debt, and have only one card to pay off. Interestingly, credit cards that are designed solely for a balance transfer, also carry a 0% or low APR introductory period that can extend, at times, up to 20 months or 2 years.

So, after you have transferred your balance, you will now have a single card balance, with barely any interest charges during the introductory rate period.

c. You can access your home’s equity:

This is a very crucial decision you can make if you are too desperate to be free from debts. You have two options if you want to compromise your home’s equity to pay down debts. One is, you can take out a HELOC (Home Equity Line Of Credit), which functions like a credit card. The other is, you take out a Home Equity Loan which is just like any other conventional loan.

But you have to consider the fact that you are turning all your unsecured debts into secured debt, by choosing to access your home’s equity for debt consolidation.


Because the debts which are bothering you are unsecured debts, like credit cards and payday loans. Once you take out a home equity credit and pay off these debts, you will be left with an asset-backed credit!

If you start to default on the payments of the Equity Loan or Equity Line of Credit, then you are jeopardizing your house. That’s so, as your equity is the collateral for these two forms of credit.

Hence be wise, and only try this, if your above two options of ‘consolidation loan’ and ‘balance transfer’ are closed or insufficient to pay down your debts. Else there are high chances that you might have to lose your home!

d. You can borrow money from retirement accounts and insurance cash-value:

This one’s probably the riskiest tool to use for debt consolidation. You are compromising your retirement savings or the cash value that’s your whole life insurance has been building over the years.

You can definitely borrow from such financial tools, but it’s very risky. So, it’s better you discuss with a financial advisor whether or not you should pull out money from a 401(k) or your life insurance policy. With this, we have come to the end of our discussion.

But before we leave this page, here are a few one-liners you must pay attention to accomplishing the best DIY personal debt consolidation:

1. Any new form of credit, that you are about to take out for consolidation must carry an interest rate significantly lower than the debts you plan to pay down.

2. You should not start to default on the new credit, else things can get really complicated later on. If things don’t go as planned,  you can always turn toward the best debt consolidation companies, which are authentic and will help you out of this mess!

3. Debt consolidation is only possible with unsecured debts. For secured debts like mortgages and all, you will have to choose between refinance or loan modification. But, that’s a completely different topic to discuss!