Bad debt — like that carried on your revolving credit card accounts — means you have to pay more in interest, penalties and late fees. That could add up to more than the initial cost of the items you purchased. Plus, carrying debt affects your financial future. To turn things around, a debt consolidation plan can help.

How credit card debt consolidation works

Debt consolidation allows you to combine all your debt into a loan with a lower interest rate, a lower monthly payment or both. First, list all your outstanding debt. Be sure to indicate balances, monthly payment amounts and the name of the creditor. Then, add up your total balances to get a final figure of your outstanding debt. This is the number you need to ask your loan representative to help you pay down. If approved for a debt consolidation loan, your credit report will show you have cleared outstanding card balances. Your credit rating may be viewed more favorably than before. Stay current on the consolidation loan payments so you can maintain a higher credit rating and remain in good standing with lenders.

How do I combine all my debts into one payment?

A Home Equity Line of Credit (HELOC) allows you to borrow against the value — or equity — your home has built up. If you qualify, a HELOC may provide the money you need to cover all your outstanding credit card debt. A Personal Loan could help combine separate credit card debts into one single, and hopefully lower, payment. Ask your lender if using payroll deduction to repay the loan qualifies you for a lower rate, which can help you pay off your loan faster. Transfer outstanding balances to a lower rate credit card. Typically, when you carry a heavy debt load, opening another credit card is the last thing you should do. But in some cases, a new credit card with a lower rate, and no annual fees or interest when you pay your balance in full, could be a smart move for paying off existing debt sooner.

Set good financial habits for the future

Eliminating debt can help your peace of mind, and help you prepare for future financial goals. Use a debt consolidation calculator to help you see how making one smaller payment is better than making many payments to multiple creditors every month. Then, see how much more money you keep in your pocket!