What Kinds of Debt Can You Consolidate?
Debt consolidation is one of the most practical ways to deal with multiple high-interest debts. You can pay off a bundle of debts all at once by taking out a low-interest consolidation loan. Then you can pay off the amount with a low monthly payment that fits comfortably into your budget.
In some cases, you may even be able to renegotiate your debt at the same time to reduce the total amount that you owe in return for not defaulting on the debts. However, only certain types of debt can be consolidated. When building your debt repayment plan, it’s important to sort your debts based on the best way to resolve them. DebtBlue can help by first explaining what kinds of debts you can consolidate.
Here's what you need to know.
Unsecured Debts vs Secured Debts
Debt consolidation works for unsecured debts. These are debts that are not based on a specific property or collateral. Unsecured debts include credit card debt, store cards, medical debt, and certain types of personal loans. You can wrap all these types of debt into a single debt consolidation loan. Student loans are also unsecured debt, but require a dedicated student loan consolidation service.
Debt consolidation does not work for secured debt. Secured debt is based on collateral. The best examples are mortgages or car loans, where the house or car can be taken by the lender of you fail to make payments. Secured debt cannot be consolidated because different rules apply.
- 1. Credit Card Debt
Credit card debt is one of the most common types of debt that can get out of hand. Accidental overspending or spending during a financially difficult time can result in stacks of credit card debt, which can get into aggressive collections.
Because credit card debt also incrases your total credit usage, it applies a big reduction to your credit score.
Fortunately, you can wrap up all credit card debts in consolidation, transferring all the debt into one installment loan that will free up your credit usage and improve your credit score.
- 2. Medical Debt
Medical debt is a type of unavoidable unsecured debt that occurrs when you are injured or severely ill. It can be very difficult to deal with medical debt, but debt consolidation can help you stop the collection calls and restore good terms with your medical provider network. Many people benefit from debt consolidation for medical debt that they didn’t have a choice in creating.
- 3. Store Cards
Store cards are a type of credit card dedicated to a specific retail store or brand. They allow a customer to take out a line of credit with the store – or the store’s financial partner – which can result in an unsecured debt account.
Because store cards are unsecured debt, they can also be resolved by a debt consolidation loan.
- 4. Gas Cards
Gas cards are a unique type of card dedicated only to buying gas – and sometimes convenience store snacks. Getting a gas card can be a way to control your finances, but it is also possible for your gas card balance to fall into collections. When this happens, it creates an unsecured debt that can be consolidated.
- 5. Unsecured Personal Loans
Many types of personal loans are also unsecured. Short-term loans often have high interest rates that can be hard to deal with if your plans for repayment go awry. It can be very useful to wrap up any burdensome personal loan debts into your debt consolidation plan.
- 6. Unique: Student Loans
Student loans can also be consolidated, but they can’t share a consolidation loan with the rest of your debts. Instead, they will need to be consolidated through a special student loan consolidation plan. This transfers your student loans to a private lender who can offer lower interest, a custom repayment plans, and overall better terms.
You have options, and we're here to help!
Personalized Debt Consolidation with DebtBlue
If you are considering debt consolidation as the solution to your unsecured debts, the first step is to consult with a professional debt relief advisor. DebtBlue specializes in debt relief including debt resolution and debt consolidation services. By speaking to one of our Certified Debt Specialists, we can assess which of your debts quality for consolidation and build a personalized debt relief plan.
Contact us today to begin your debt consolidation journey.