Managing Debt

Debt Consolidation Options

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

How to Consolidate Debt and Start Saving

The average American household has more than $137,063 in debt, and that burden can feel overwhelming.

Credit cards are a major source of painful debt – revolving balances that average more than $5,700 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 those balances start going 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 one of the most important steps 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, which pay off your debts and create a single repayment program, and balance transfer credit cards, where you can 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 four options for managing your debt:

  Credit score requirements
Maximum amount
Interest rates
Balance transfer credit card Good credit scores can receive 0% APR introductory offers You can transfer a balance equal to 70–100% of your existing credit
National average of 17% for all credit cards (after introductory window
Good credit earns lower interest rates and higher loan limits Depends on credit score and history. 6.99%–24.99%, depending on credit score
Cash-out refinance Good credit earns lower interest rates Typically, 80% of your home’s available equity (Loan-to-Value ratio),
although Discover Home Loans permits less than 90% for good credit.
equity loan
Good credit earns lower interest rates Typically, 80% of your home’s available equity (Loan-to-Value ratio),
although Discover Home Loans permits less than 90% for good credit.

You can take a home equity loan or do a cash out refinance with Discover Home Loans. Some lenders, like Discover, offer home equity loans and mortgage refinance with CLTV below 90% and FICO as low as 620. APR is between 3.99% and 11.99%. 

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 credit card. Many cards today offer a 0% APR for the first year to 18 months, and sometimes you can get perks that include cash back or a $0 fee on balance transfers.

Shifting debt to a new card only works if you are getting a better rate, stop spending on your existing card and can 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 could receive a stronger interest rate on personal and home equity loans, which typically makes them a better vehicle for larger debts.

Personal Loans

A personal loan is one of the most common tools used to consolidate personal debt.  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 these loans above 30% depending on the lender (Discover Personal Loans have an APR range from 6.99% to 24.99%). If you have a less than stellar credit rating, or you want to borrow more than the typical personal loan lender can provide (the maximum loan amount the Discover Personal Loans offer is $35,000), there are additional options.

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 may 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. Discover Home Loans offers rates from 3.99%-11.99%.*
  • Fixed interest rate, terms and monthly payment amounts.
  • You can borrow more than other loan types. With Discover Home  Loans, borrow from $35,000-$200,000.

* The lowest APR is available to borrowers requesting at least $$80,000 with the best credit and other factors. The APR will be between 3.99% and 7.99% for first liens and 3.99% and 11.99% for second liens based on loan amount and a review of credit-worthiness, including income and property information, at the time of application. These APRs are available as of 05/11/2020 and are subject to change without notice. Please visit to see today’s APRs. Loan amounts available from $35,000 to $200,000.

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

"To see which debt consolidation option is best for you and your finances, check out Discover Home Loans debt consolidation calculator"

Cash-out Refinancing

Unlike a home equity loan, a cash-out refinancing is actually a restructured loan for an amount larger than 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 refinanced 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 and zero appraisal fees. Plus, fixed rates starting at 3.99% APR.

To see which debt consolidation option is best for you and your finances, check out our debt consolidation calculator, where you can enter information for multiple bills to see if Discover’s debt consolidation options can help you simplify your bills and reduce your debt. 

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  • Weekdays 8am–Midnight ET
  • Weekends 10am–6pm ET