Bills Logo

Can You Consolidate Your Debt Yourself?

Can You Consolidate Your Debt Yourself?

Get rid of your debt faster with debt relief

Choose your debt amount

See if you qualify

Or speak to a debt consultant  844-731-0836

Daniel Cohen
UpdatedJun 11, 2024
  • clock icon
    8 min read
Key Takeaways:
  • You can consolidate your debt yourself!
  • It takes planning, perseverance, and staying organized.
  • The key is creating an accurate budget.

What to Know Before You Consolidate Your Debt

Consolidating your debt requires a little bit of planning and a lot of execution. Look at your debt like a carpenter looks at building a cabinet — you need the right tools (in this case, knowledge), the right materials (money), and time to complete your project. Let's put together a plan to consolidate your debt.

Before we get to the action-oriented part of this article, we need a brief discussion on the word "consolidation." The dictionary defines consolidation as combining two or more items into one. In the personal finance world, people use the word when they refer to credit counseling or debt settlement. Neither of these approaches fit the dictionary definition because neither combines all of your debts into a single debt. Both, however, allow you to make one monthly payment, which a credit counselor or debt settlement company use to resolve your enrolled debts. Let's get back to the fun part of this article.

Consolidate your debt yourself by taking these six steps:

  • Step 1: Tally Your Debt
  • Step 2: Add Up Your Household Income
  • Step 3: Create a Budget
  • Step 4: Create an Action Plan
  • Step 5: Negotiate!
  • Step 6: Evaluate Your Progress

We start with, naturally, step 1.

Step 1: Tally Your Debt

Collect your monthly statements and write down the information in a table like the one below. Get a copy of your credit report from to see if you missed any debts. Two brief asides: is a no-cost, no-gimmick way to get copies of your credit reports. Also, credit reports are not infallible records of consumer debts. You may have debts that do not appear on your credit reports because the creditor does not report this information.

Although you should include your home and student loans on this table, you will focus your debt consolidation energies on the other, high-interest debts first.

Your Debt
Type of DebtBalanceInterest RateNo. Payments RemainingMonthly Payment
Mortgage / Rent
Student Loan
Vehicle Loan
Credit Card 1
Credit Card 2
Personal Loan
Other Account 1
Other Account 2

Step 1: Tally your debts in a spreadsheet like the one above.

Sum the Balance column to see the total of all debts. Add-up the Monthly Payment column, too. We will need the Monthly Payment total later.

Quick Tip

Get a no-cost analysis of your debt resolution options from a debt relief partner.

Step 2: Add Up Your Household Income

Why do we need to know our household income? To figure out how much you can devote to retiring debt, you need to start with your household income. Write down your monthly income after taxes, insurance, and retirement savings. If you are paid every two weeks, multiply the average amount times 26 to get your annual after-tax income. Then divide your annual after-tax income by 12 to get your average monthly income. We will need this number in Step 4.

Your Monthly Income
SourceMonthly Gross IncomeMonthly Net Income
Borrower 1 Wages
Borrower 2 Wages
Investment Income
Other Income

Step 2a: Add Up Your Household Income

Now subtract your monthly mortgage/rent, student loans, and vehicle loans from your monthly after-tax income.

Available Income
Subtotal from Step 1
(Here, subtract Monthly Net Income we found in Step 2)
Amount Available For Budget and Debt Payments

Step 2b: Determine Available Income for Expenses and Debt Payments

Step 3: Create a Budget

One we know our income and debts, we can start to home in on the amount we can use to pay-down our debt. Write down all of your monthly expenses in a table similar to the following. "Priority" is your relative importance for each expense. Set a scale or range that seems natural for you. For example, your rent or mortgage should be a "1," and treats like cafe-bought coffee drinks should be a "5."

Your Monthly Expenses
ExpensePriorityAverage Monthly Amount
Utility 1
Utility 2
Utility 3
Insurance 1
Insurance 2
Insurance 3
Child Care
Cell Phone
Car Repair/Expense
Household Repair
Gym Membership
Other 1
Other 2
Other 3

Step 3a: Your Monthly Expenses

Total your monthly expenses. Compare your expenses to your income, which we learned in Step 2. The next step is where the magic happens.

How much do you have left to pay off your debts? If the amount is small, look for ways to cut spending. Try the My Saving Machine to learn ideas for saving money, and how much little expenses add up over time. Remember, the more you have available to pay to your debts each month, the sooner you will be debt free.

How much can you set aside to retire your debt? We answer that next. Fill in the following table with the information you gathered in the first three steps:

Your Debt Retirement Number
ItemYour Plan Amount
Amount Available For Budget and Debt Payments (Step 2b)
Monthly Expenses (Step 3)
Amount Available for Debt Payments

Step 3b: How Much Can You Use To Retire Debt

Step 4: Create an Action Plan

This step requires you to make some tough decisions. How do you want to handle your debt? Most of us would like to repay our creditors in full, but circumstances may not allow that. Let us look at three debt repayment options.

Debt Avalanche

Rank your debts by interest rate. Pay the minimum amounts on all other debts, and pay the maximum amount on the one with the highest interest rate. Repeat each month until you pay-off the account with the highest balance. Move on to the next-highest account and pay the minimums on the others and the maximum on that account. Repeat these steps until all of your accounts are paid.

The debt avalanche pays the account causing you the most financial pain first. This results in you achieving debt freedom faster and at lower cost than paying a little more on all of your accounts.

Debt Negotiation

Here, you stop paying your debts, such as credit card balances, and instead save as much as possible in a separate account each month. You start to receive collection calls. At some point, usually after 180 days, the creditor will sell your collection account to a third-party collector or move the account to a separate department for debt negotiations. At this point, you can start to negotiate lump-sum settlement agreements for your unpaid debts. How much the settlement amount will be depends on the creditor and your skills as a negotiator. For credit card debts, expect to settle for 40 to 60 cents on the dollar. For other debts, such as medical debts, the range varies widely.

Debt settlement/negotiation is not for you if you are not disciplined about banking your savings every month. It is also not for people who negotiate by giving in to an opponent's every demand. It is also not for people who need to maintain a high credit score, or will be kept up at night worrying about the possibility of a lawsuit.

If you want to pursue this option but avoid the do-it-yourself heavy lifting, consider working with a commercial debt settlement company.

Hardship Program

Many creditors, such as credit card issuers, offer hardship programs that cut interest rates and waive some fees. Credit card issuers do not publish the terms and conditions of hardship programs. Call the customer service department and ask is your issuer offers one. Some steer customers into credit counseling programs. Some close the account, so be sure to ask about this detail. Because creditors do not publish the terms and conditions of their hardship programs, these change at any time, and may vary by the customer and their circumstances.

Step 5: Negotiate!

It is beyond the scope of this article to discuss the skills you need to negotiate debt. Fortunately, the article Debt Settlement Advice discusses seven points you need to remember when negotiating a settlement. If you follow the steps here on this page, you will be well on your way to negotiating from a position of strength because you will know exactly what you can afford.

Step 6: Evaluate Your Progress

Every two months, complete an updated version of the table you completed in Step 1. Expect occasional setbacks, but your progress should be forward. If you are staying in place, then redo Steps 2 and 3 to learn why. A plan is a process, and sometimes it takes several attempts before fine-tuning a plan that consolidates your debt.

Struggling with debt?

Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q1 2024 was $17.69 trillion. Housing debt totaled $12.82 trillion and non-housing debt was $4.88 trillion.

A significant percentage of people in the US are struggling with monthly payments and about 26% of households in the United States have debt in collections. According to data gathered by from a sample of credit reports, the median debt in collections is $1,739. Credit card debt is prevalent and 3% have delinquent or derogatory card debt. The median debt in collections is $422.

The amount of debt and debt in collections vary by state. For example, in Minnesota, 13% have any kind of debt in collections and the median debt in collections is $1623. Medical debt is common and 2% have that in collections. The median medical debt in collections is $418.

To maintain an excellent credit score it is vital to make timely payments. However, there are many circumstances that lead to late payments or debt in collections. The good news is that there are a lot of ways to deal with debt including debt consolidation and debt relief solutions.