Managing Debt

4 ways to consolidate your debt

Young woman looking at her longstanding debt considering the best way to consolidate it.

How to consolidate debt and start saving

As of September 2022, the average American household debt is more than $165,388.That burden can feel overwhelming for many households, especially when economic conditions are hard to predict.

Credit cards are a major source of debt – with revolving balances that average more than $7,486 per household and growing – but most of us also carry student loans, mortgages, and sometimes high vehicle loan payments.

Getting a handle on your finances often involves consolidating debt so that your payments are more manageable and you can work paying those balances down.

The good news is that you have time to work on reigning in your spending and consolidating debt.  When considering the question: “How do I consolidate debt and start saving?” reducing your monthly spending to an amount within your means is an important step toward finding the answer.

What is debt consolidation?

To consolidate your debts, you will want to bring all your various debts together into a single bill. The standard ways to do this are through loans that pay off your debts and create a single repayment program, or with balance transfer credit cards that make it possible for you to move existing debts to a single card.

In both cases, your goal is to both simplify the number of bills you must pay attention to each month, while also reducing the amount of interest you pay each month on the debt.

Let’s look at 4 options for managing your debt from Discover®:

  Credit score requirements Maximum amount Annual Percentage Rate (APR)
Balance transfer credit card Good credit scores can receive 0% APR introductory offers You can transfer a balance up to a certain percentage of your existing credit limit National U.S. average APR on new credit card offers after the introductory window expires is 23.39% as of January 2023
Personal loan Good credit earns lower interest rates and higher loan limits Depends on credit score and history 6.99%–24.99%, depending on credit score
Home equity loan Good credit earns lower interest rates Typically, 80% of your home’s available equity although Discover Home Loans permits less than 90% with good credit. View current rates for first and second liens with Discover Home Loans
Cash out refinance Good credit earns lower interest rates Typically, 80% of your home’s available equity although Discover Home Loans permits less than 90% with good credit. View current rates for first and second liens with Discover Home Loans


With lenders like Discover, you might be able to qualify for a home equity loan or a cash out refinance with a combined loan-to-value (CLTV) ratio below 90% and FICO score as low as 620. Discover Home Loans also offers home equity loan and mortgage refinance options with zero origination fees, zero application fees, zero appraisal fees, and low, fixed rates for first liens and second liens.

1. Balance transfers to credit cards

If you have only a small amount of debt, you might be able to pay it off through a balance transfer to a new or existing credit card. You may even have an existing card or be able to find a new one that offers 0% APR on balance transfers for a limited term.

Shifting debt to a new card works the best if you get a better rate, stop spending on your existing card and pay off your debt within the 0% APR term. Some cards will charge you interest on the transfer if any of that amount remains past the initial 0% APR term, which could cause a financial hit down the road.

If you have good credit, then you might be able to qualify for a lower interest rate on a personal or home equity loan, which typically makes them a better vehicle for consolidating larger debts.

2. Personal loans

A personal loan is one of the most common tools used to consolidate personal debt. Personal loans like those offered by Discover Personal Loans typically don’t require any collateral, so your rate is largely dependent upon your personal credit history. Poor credit can push up the APR on some of these loans above 30% depending on the lender. If you have a less than stellar credit rating, or you want to borrow more than the typical personal loan lender can provide, there are additional options.

3. Home equity loans

Your home equity can be a lifeline to getting back in fit financial shape.

Suitable for larger debts, long-term expenses, and other large expenses like home improvements or weddings, home equity loans typically offer better interest rates since they are secured by your home.

There are several reasons why you may want to consider a home equity loan for debt consolidation:

  • Rates might be better than unsecured loans like credit cards or personal loans.
  • If you have a lower credit score but still qualify, your APR with a home equity loan typically won’t go up as high as it would with an unsecured loan like a personal loan.
  • Fixed interest rate, terms and monthly payment amounts. Discover Home Loans offers a second lien home equity loan with low, fixed rates.
  • Higher borrowing limits than other loan types. With Discover Home Loans, you can borrow from $35,000-$300,000.

If you have a large amount of debt on high interest rate cards or loans, a home equity loan can reduce payments, interest amounts and more. This can allow you to get back on your feet and pay just a single bill each month. Minimizing your bills makes it easier to control your finances and ensure you’re on the right path to financial stability.

Person choosing what debts to consolidate with their debt consolidation calculator

Debt consolidation loans can help you reduce monthly payments and save on interest.

4. Cash out refinancing

Unlike a home equity loan, a cash out refinancing is actually a restructured loan for an amount larger than the remaining balance of what you owe on your original mortgage and any other outstanding home loans. The difference between your refinanced loan and what you owe can be paid back to you in cash, which you can put towards debt consolidation.

Interest rates, maximum borrowing limits, and repayment terms are similar to mortgage loans and home equity loans, where good credit drives interest rates down, your available home equity dictates your maximum borrowing, and repayment terms can flex to meet your monthly budget.


Whereas a home equity loan is a loan in addition to your mortgage loan that you will have to manage and repay separately, a cash out refinance loan allows you the simplicity of a single bill each month.

You can get a mortgage refinance from Discover with zero origination fees, zero application fees, zero appraisal fees and low, fixed rates for first liens.

To see which debt consolidation option is best for you and your finances, check out the debt consolidation calculator from Discover Home Loans, where you can enter information for multiple bills to see if debt consolidation options with Discover can help you simplify your bills and reduce your debt.

Articles may contain information from third parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third party or its information. 

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