Should You Consolidate Your Debt?

If you find yourself looking at several thousand dollars of debt, you may wonder how you can move forward financially, lessening the impact that debt can have on your credit—and your life. Consolidating your debt may give you more flexibility and agency in paying down your debt. But how can you consolidate, and what are the pros and cons of each type of debt consolidation? We’ll explore two approaches in this article. 

1. Consider taking out a personal loan to pay off the debt.

A fixed-rate debt consolidation loan is a time-tested way to help individuals pay off debt. Generally, the interest rate you can get on a personal loan will be lower than the interest rate on any credit cards you may have. Initially, you’ll use the consolidation loan to pay off your debts, and then pay back the loan in set installments over a certain period of time, often between one and five years. 

PRO: Although new loans can cause a dip in your credit score due to the credit inquiry, this dip is often temporary, and consolidating your debts can actually improve your credit in the long term. For example, as you pay off lines of credit with a debt consolidation loan, you’ll reduce the credit utilization rate on your credit report, which can bump your number up. In addition, making regular, fixed payments on a personal loan will slowly improve your credit score over time. 

CON: If your credit score is already quite low, it can be very difficult to secure a personal loan with a low-interest rate. Make sure that you don’t take out a debt consolidation loan with a higher interest rate than your current debts. Also, be aware that taking out a loan may mean you ultimately pay more interest over time, due to the longer duration of the loan. While this may make the monthly payments more feasible, it’s wise to ask about the principle vs. interest breakdown when you’re considering the term length of your loan.

2. Consider a 0% interest balance transfer credit card.

If you can’t qualify for a personal loan, one unorthodox way of consolidating debt is with a balance transfer credit card. Essentially, you find a credit card with an initial APR of 0%, and you transfer balances from several credit cards onto one single card, thus consolidating your debt. (This also has the advantage of simplifying your finances so that you have a single monthly payment.) During the 0% APR promotional period on the credit card, make aggressive steps to pay off your accumulated debt. 

PRO: This can be an effective strategy because, initially, all payments you make are going directly to the principal debt. You are not paying off any interest. If you have a good amount of money saved and can make large contributions to pay off your debt, a balance transfer credit card can help you pay the debt off directly, rather than paying additional interest. 

CON: All good things must come to an end, and no credit card maintains a 0% interest rate for long. If you move your debt to a balance transfer credit card, you must be prepared for that rate to eventually rise into the teens or low twenties after the promotional period has passed. Mark the end of that period on your calendar, and know that when the card’s true APR kicks in, you’ll again be subject to high-interest rates. Ideally, you’ll have a large portion or all of the debt paid off at that point. Otherwise, you could continue to accrue debt—just in a new location. 

Want Help Understanding Even More About Debt Consolidation?

Unexpected debt can be confusing and overwhelming, and you deserve to have someone on your side to demystify the process of repayment. Southwestern Investment Group has experienced financial advisors who can answer your questions about debt consolidation and repayment. Contact Southwestern Investment Group today to schedule a consultation!

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Jeffrey T. Dobyns


President, SageSpring | Financial Advisor, RJFS 

Jeffrey T. Dobyns

President, SageSpring | Financial Advisor, RJFS

Beyond crunching numbers and investment strategies, at SageSpring, we’re about building relationships. When you encounter Founder & President of SageSpring, Jeff Dobyns, it’s easy to understand why this is at the very heart of who we are as a firm. You won’t find stuffy formalities with Jeff; instead, you can expect to find him sharing a warm smile, communicating a compelling vision, or patiently untangling life’s complex challenges with clients. He believes in truly getting to know clients, understanding their aspirations and priorities, and navigating their financial plans with a tailored, comprehensive approach. Our team members have often been caught taking notes on Jeff’s effortless relationship skills from a distance, and we admire them for striving to learn from one of the best. 

Jeff’s financial expertise and wisdom are the perfect match to his innate people skills. Jeff holds the prestigious CERTIFIED FINANCIAL PLANNERTM certification, Chartered Life Underwriter (CLU®), and Chartered Financial Consultant (ChLU®) designations, and has held executive positions with financial planning firms for more than two decades. 

His dedication extends beyond the office to the boardroom and the local community, where Jeff is passionate about giving back. He serves as Chairman of the Board of Men of Valor, a prison ministry and mentoring program. Jeff also serves on the board of Send Musicians to Prison, which shares hope, healing and restoration with the imprisoned through musicians & artists. Jeff actively supports other initiatives in the community by sitting on the board of The Signatry of Middle Tennessee and the Halftime Institute of Nashville. 

Witnessing his four children, Gracyn, Hunter, Tanner, and Logan, excel on the field is almost just as rewarding, if not more, than celebrating the victories of seeing his clients overcome obstacles and build wealth. Spending weekends boating on the lake, hiking mountain trails, and fishing with his family are the moments Jeff cherishes most. It’s this grounded perspective that reveals the true meaning of wealth for Jeff: not just numbers on a page, but the freedom to create experiences that enrich your life and the lives of those you love. When you choose the Dobyns McMillin Wealth Team, you choose more than financial expertise. You choose a partner who champions your dreams, celebrates your victories, and walks besides you on the path to achieving your unique goals.

**Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER TM, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.