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Commonsense Strategies to Consolidate Debt

Calculating bills and finances

No doubt, it’s easy for debt to creep up on anyone

Maybe you’ve charged one too many celebrations to your credit card; suffered an unexpected car breakdown; or, made some middle-of-the-night roof repairs. Even worse are devastating medical bills that can quickly accumulate. Combined with items like routine car payments, other lines of credit, or student loans, it can become debt overload.

But what should you do?

Take action! If you have too much debt, confronting the situation head-on is always preferable to sitting in a state of denial. Remember, United can help if you find yourself in an overwhelming situation or simply paying too much in interest expense.

Too much debt:

  • Hurts your credit rating, which can affect other areas of your life including employment opportunities, how much you pay for current and future credit, even rates on insurance;
  • Is frustrating to manage, especially with multiple payments and due dates;
  • Costs a lot in compounding interest, some of which can be very expensive;
  • Makes it easy to miss payments, which can result in late charges or rate increases;
  • Can escalate, impacting current and future financial choices; and,
  • Can be an invitation to bankruptcy, which can overwhelm your personal and financial well-being for years.

What are the best ways to get rid of debt?

If we all had that rich uncle, some things would take care of themselves. Since most of us don’t, there are smart ways to pare down debt. For example, if you have several debts, one option is to make additional payments on the highest interest rate debt first, enabling you to pay that debt off sooner and reduce your monthly interest expense.

Other methods, such as Dave Ramsey’s Debt Snowball Method, suggest paying the minimum payment on all debts, while paying extra on the debt with the smallest balance until you pay it off, followed by the debt with the next lowest balance, etc. It becomes a moral victory and enables you to reduce the total number of payments you’re juggling.

The downside? Paying extra on one debt, while keeping up with other multiple loan payments (and being on-time) can be extremely tough, even for the most disciplined person.

A sensible solution.

Debt consolidation can be a practical and convenient way to pay down debt. By rolling all of your debt into a single loan, funds are disbursed (sometimes by the lender, sometimes by the borrower) to pay off all of your smaller loans. Several payments are replaced by one, making it easier to budget and manage. The goal is to lower the interest rate and the monthly payment while paying off your debt more quickly. (Source:

The benefits of consolidating debt:

  • Multiple payments become one convenient payment;
  • Eliminates higher interest rate debt;
  • Reduces the risk of late payments;
  • Encourages confidence; and,
  • May improve your credit score.

Primarily, there are two ways to consolidate debt: with an unsecured loan based on your signature or through a secured loan, pledged with collateral.

  • Secured loan – May be easier to attain because it offers less risk to the lender. In exchange for the pledge of collateral, such as your home equity, a car or 401(k), you save with a lower interest rate.
  • Unsecured loan – A good option if the amount you want to consolidate is not too large and you have good credit; or, you don’t have any collateral readily available. Unfortunately, if you have excessive debt, an unsecured loan may be harder to obtain. 

Using your home equity as a tool to manage debt:

If you’re a homeowner, a home equity loan or home equity line-of-credit (HELOC) can be an excellent choice for debt consolidation, enabling you to pay off other debt easily. Rates are often lower other types of loans, including personal loans and credit cards. Still, because you’ve pledged your home, it’s important to understand the risk if you’re unable to make the payments.

  • Home Equity Loans (closed-end loan, fixed rate) – The loan is for a set amount and repaid in fixed monthly payments. It works well for debt consolidation or when you have a definitive amount in mind to borrow. It may also be a good choice if you’re more conservative in your approach to debt.
  • Home Equity Line-of-Credit (open-end credit, variable rate) – This revolving line is a convenient way to pay off other debt and can also be used for future needs. It’s an ideal choice if you want a continuous credit line, replenished as you repay.

Home equity loans and credit lines are not only cost-effective but versatile. In addition to debt consolidation, you can use the funds for major purchases, home renovations, a special event, college tuition or even investments. There is also a potential for tax savings.

The interest may be tax deductible.

Benefits vary by taxpayer, but you may qualify for a tax deduction on the interest you pay. According to, the deductions for home equity and mortgage interest are available to taxpayers who are eligible to itemize deductions on a Schedule A attachment to their Form 1040. However, eligibility to itemize requires that your total itemized deductions, including home interest, be greater than the standard deduction amount.

For more, visit TurboTax, or consult your tax advisor.

Newly married couples face other challenges.

If you’re a homeowner AND newly married, it’s important to talk openly about money and how you plan to handle current and future debt. If one or both of you are bringing a lot of debt to the marriage, it’s best to address the situation immediately. Consider the pros and cons of consolidating debt and whether home equity financing is the right solution for you.

Remember, for many marriages, financial stress can be a killer. Nonetheless, if you start off with a solid game plan to eliminate debt, you give yourselves a greater chance for future success and personal happiness.

Should you consolidate debt?

If you’re not sure, try calculating your monthly payment with or without a debt consolidation loan and how many months it will take to become debt free:

Or use our Financial Calculators to determine your options.

Debt consolidation can be an excellent and multipurpose financial strategy but only if you discipline yourself not to accumulate more debt. As reminds, “debt consolidation could cause you to let your guard down and incur additional debt before you have paid off the consolidation loan, starting the cycle all over again.” The last thing you want is to end up where you started – with too much debt.

Now’s the time to take action.

To review your debt consolidation options, contact United at (888) 982-1400 or visit the Home Equity page. You’ll be one step closer to taking charge of your debt situation. Equal opportunity lender. Loan and payment terms subject to credit review and approval. Terms and conditions subject to change without notice.