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Debt Consolidation Scenarios - Discover Why You Should Consolidate Debt

Debt Consolidation Scenarios - Discover Why You Should Consolidate Debt
Betsalel Cohen
UpdatedApr 9, 2024
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    3 min read
Key Takeaways:
  • You aren't alone. As of April 2020, US Household Debt is over $14.3 trillion.
  • Debt Consolidation is a great way to manage your debt and get debt free.
  • Discover four personal debt scenarios and ways to consolidate your debt.

Find Your Reason and Tactic to Consolidate Debt

Debt consolidation is a great way to improve your financial situation. There is no magic debt consolidation formula. You need to find the program that best fits your personal financial situation. 

Overall, household debt is increasing. According to the New York Federal Reserve, as of March 31, 2020, total household debt is over $14.27 trillion $820 billion.

Housing debt (mortgages) is over $10 trillion. Non-housing household debt for the same period is over $4.52 trillion, with credit card debt at $820 billion. Student debt is the most substantial non-housing debt at over $1.54 trillion, followed by Auto loans, at $1.34 trillion.

Debt Consolidation: Allows you to manage your debt

It is vital to size up your debts and find out the areas where you can best consolidate different debts into affordable payments at the best terms. Since each person has a unique financial situation, it is crucial to find the best debt consolidation tactic that meets your goals.

If you are looking to save money, lower your monthly payment, or pay off your debt faster, then you should consolidate debt. Check out the four debt consolidation scenarios and discover debt consolidation tactics that can help you improve your financial situation.

Four Debt Consolidation Scenarios

In order to help you find the best debt consolidation tactic check out the four scenarios and find out which one(s) fit your situation. Remember to match the debt consolidation solution to your financial goals, for example, lower your monthly payments, or cut your overall financial costs.

When shopping for the best solution remember to make sure that you choose a reputable company, get a full explanation of how the program works, and how much it will cost.

Scenario 1: Want to Save Money and Have the Cash

If your financial situation is good, meaning that you have a steady income, an emergency savings fund, and good to excellent credit then there are some great debt consolidation tactics for you. Here are three of the easiest, quickest, and best ways to save financial costs:

  • 0% Credit Card Balance Transfer
  • Debt Consolidation Loan:

Scenario 2: Have a Home and Need a Lower Payment

If you have a home, with extra equity, then a long-term mortgage can help you lower your monthly payments with a low-interest loan. Mortgages are secured loans, so they have lower interest rates than credit cards and personal loans: however, take into consideration that you are pledging you home as security. If you default, then your home is at risk. Two options to consider are:

Scenario 3: Struggling to Make Payments but Can Afford Minimum Payments

If you are struggling with debt and have high-interest rates on your credit cards, then a debt management plan might help. Your first step is to get some help with your budget and financial plan through a credit counseling program.  If deemed appropriate, you might be recommended to use a debt management plan that consolidates your credit card bills into one payment, at lower interest rates. Consider trying:

Scenario 4: Struggling and Can’t Afford Minimum Payments

If you are struggling with debt due to a financial hardship such as a job loss, divorce, death of a spouse, then there are different solutions that can help you consolidate your payments and help you get out of debt. Each debt consolidation plan has its pros and cons. You need to consider your credit, and the possibility of facing debt collectors, and even lawsuits. However, it is best to deal with your problems and find a debt consolidation plan that helps you get out of debt. Here are two plans that could possibly help:

Debt statistics

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 Q4 2023 was $17.503 trillion. Housing debt totaled $12.612 trillion and non-housing debt was $4.891 trillion.

According to data gathered by from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.

Collection and delinquency rates vary by state. For example, in South Carolina, 17% have student loan debt. Of those holding student loan debt, 10% are in default. Auto/retail loan delinquency rate is 7%.

Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.



LLeonard Creation, Aug, 2017

I am really struggling with my monthly payments. I was working two jobs, but had to quit one because of health problems in the family. I never thought that I would have to deal with a financial hardship, but I have gone through my rainy day savings. Thanks for your advice and pointing out that there is a debt consolidation solution for people struggling with financial problems. I am going to give debt settlement a try.