What kind of debts are feasible to consolidate?

There are several types of debt that you can consolidate, but not all of them. Here’s a look at which types of debt you should be able to combine into one loan or line of credit and those who won’t be reasonable candidates for debt consolidation loans to reap the benefits.


Student debt

If you file for bankruptcy, student loans cannot be cancelled. This can be problematic because if your income drops significantly after graduating, paying off your student loan debt is hard when other debts are discharged in bankruptcy proceedings. The only way you can get out from under this obligation is by making payments on time and getting permission from the lender to defer payments until later down the road (compared with credit cards). Interest rates vary depending on whether it is an undergraduate or graduate program.


Medical debt

This is often not dischargeable in bankruptcy and is, therefore, a big no-no for consolidating your debts. The same goes for debt consolidation and debt settlement. Unless you have only medical bills or are paying off the total cost of a surgery through a credit card (which won’t be discharged anyway), your doctors probably aren’t taking any payment plan that involves lump sum payments over time.


Credit card debt

If you have credit card debt, you might be able to consolidate and lower your monthly payments by reducing the money that goes toward paying off the interest on each month’s bill.

To consolidate your credit card debt into a new loan with a lower interest rate, you first need to determine how much money you owe on each account. Then, shop around for lenders offering the lowest rates on personal loans. This will help ensure that any lender chosen will have a better deal than what was available from any single account holder’s bank or credit union before consolidation began. Once this is done, apply for an affordable loan through these sources so as not only to reduce monthly payments but also save money in total over time because less principal has been paid off due to lower rates.


Mortgage debt

This is a suitable debt to consolidate. Mortgage debt usually has lower interest than other debts. Mortgage debt can be a good choice because it’s often a long-term loan that can be repaid slowly, unlike credit cards and payday loans which tend to have higher interest rates and must be paid off faster.

Mortgage debts are also secured loans. Secured loans mean that if you don’t pay off your mortgage loan, the bank will take possession of your home as collateral until all the money owed has been paid back. If a homeowner fails to make payments on their mortgage and then enters foreclosure, they will usually still owe some money after selling their home at auction (usually around 40%).


Personal loans

If you’ve received a personal loan, it’s probably because you have good credit and a solid financial history. These loans are unsecured, which means they’re not backed by collateral like a house or car. They’re usually used to consolidate credit card debt. Still, if you’ve diligently been paying on this loan for several years (and have built up positive equity), it could be worth consolidating into one lump sum.

While personal loans are relatively easy to get, they typically come with fixed interest rates higher than traditional debt consolidation loans. So, consider the pros and cons before taking out a personal loan for consolidation purposes.


Debt types that are reasonable to consolidate

When considering whether or not your debts are reasonable candidates for consolidation, it’s essential to consider your current interest rates on each one. If any of your debts has an annual percentage rate (APR) lower than 10 percent (which is fairly low), then it’s probably reasonable for you to consolidate those debts into one monthly payment at those low rates instead.



When deciding whether to consolidate your debts, it’s important to consider the types of debt you have and how much work will be required.

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