Debt Consolidation Techniques That Can Save You Money

Debt consolidation companies have gained a bad rap over the past decade. They claim to help customers replace multiple debts – such as auto loans, credit cards, and school fees – with one loan with lower, more affordable monthly payments. But many unscrupulous companies actually leave their customers paying more in interest on their new loans than they were before. The goal of debt consolidation is to get out of high-interest debt and pay off one loan that carries a lower rate of interest, thus saving money. Here are four debt consolidation techniques that can save you money.

1. Ask Lenders for Lower Interest Rates

The first debt consolidation technique that can save you money is simply asking lenders for lower interest rates. Believe it or not, this is the preferred technique employed by many debt consolidation companies. Lenders would rather work with borrowers and receive some money than pursue expensive debt recovery measures through the courts. Contrary to what they might tell you, debt consolidation specialists don’t have any special avenues open for them that aren’t also open to you.

If you become their client, they will simply call your creditors on your behalf. You can use this same technique. Simply call up the companies you owe money to, explain your situation, and ask for lower interest rates. Most companies are happy to work with customers that show a willingness to pay off their debts. Your route to lower interest rates could be just a phone call away.

2. Use a Balance Transfer Credit Card

If you have excellent credit, the second debt consolidation technique that can save you money is moving high-interest credit card debt to balance transfer credit card. This is a car that has a low annual percentage rate (APR) or even a zero percent APR and lets you take what you owe on another card and transfer it over. Credit card debt is an easy trap to fall into; credit card companies often reel you in with a low introductory APR and then increase the APR after a few months.

This sends your repayments spiraling and can tempt you into paying just the minimum each month. This not only harms your credit score but causes you to pay much more in interest than you originally bargained for. To solve this, you can move your high-interest credit card debt to a balance transfer credit card. This gives you anywhere from 12 to 21 months to pay down your balance at a low APR or interest-free.

3. Transfer Your Debt to a Personal Loan

The third debt consolidation technique that can save you money is moving debt to a personal loan. This is worthwhile if the personal loan has a lower APR than your original debt. This technique will lower your monthly repayments and let you clear the debt while paying less interest. To explain how this works, let’s consider a situation where a borrower has a $20,000 of credit card debt at 29 percent APR and their monthly bills add up to $1,600. By taking out a $20,000 personal loan with a 7 percent APR and paying off the credit card balance, they can save over $300 per month on interest.

4.Borrow from Yourself

The fourth debt consolidation technique that can save you money is borrowing from yourself. This means using any savings you have to pay off high-interest debt and then saving this money back at a faster rate once your debts are cleared. Everyone needs a safety net of savings in case they lose their job, get sick, or have to cover an emergency. Experts recommend that you have at least three months’ salary as an ’emergency fund’ but just how essential are the other savings you have?

The sense of security that savings bring is so precious, people think emotionally not rationally. For example, if your savings are earning one percent and your credit card debt is costing you 18 percent, where is the advantage? However emotionally difficult it might be, using your savings to pay off your high-interest debt can be a great way to consolidate your debt and save money.


These four debt consolidation techniques could save you money and are well worth a look. Money doesn’t grow on trees but it could grow in your savings account if you consolidate your debt. The trick to making debt consolidation work is looking for ways to reduce your overall debt pile and secure a lower APR than before. With the right approach, you can save a lot of money in interest and be debt-free faster than you thought possible.