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How To Get Out of Debt

1. understand your debt, 2. plan a repayment strategy, 3. understand your credit history, 4. make adjustments to debt, 5. increase payments, 6. reduce expenses, 7. consult a professional financial advisor, 8. negotiate with lenders, the bottom line.

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How To Get Out of Debt in 8 Steps

Katie Miller is a consumer financial services expert. She worked for almost two decades as an executive, leading multi-billion dollar mortgage, credit card, and savings portfolios with operations worldwide and a unique focus on the consumer. Her mortgage expertise was honed post-2008 crisis as she implemented the significant changes resulting from Dodd-Frank required regulations.

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Holding too much debt can cause financial hardship in several ways. You may struggle to pay your bills, or your credit score could suffer, making it more difficult to qualify for future loans like mortgages or auto loans.

If you're carrying a significant amount of debt, you can take several steps to reduce it quickly and get on a healthy financial path.

Key Takeaways

• High debt levels can lead to lower credit scores, which can make it more difficult to get financial products.
• Consider paying down your credit cards with the highest interest rates first or paying off your smallest debt first.
• Look for ways to reduce your expenses and put the money you save toward your debt.
• Student loan forgiveness programs and income-based repayment programs can help with student loans.
• Consult with a professional credit counselor about your options for your situation.

Debt can include mortgages, student loans, credit cards , and other types of personal debt. Carrying too much debt can be stressful. Getting out of debt can put you in better financial health and open more opportunities.

Review all your loan statements and bills and fully understand how much debt you owe each month as well as how much interest you are paying on the different debts.

Ensure that your monthly debt obligations and necessary expenses are below your income. If you can't afford to pay your essential bills, you will need to take steps like negotiating with lenders or securing more income.

Instead of just putting extra money toward any of your debt, think about which debt you want to pay down first.

Targeting high-interest debt first using the avalanche method will save you the most money in the long run. However, some people find tackling the smallest amount of debt first works better for them because it keeps them motivated.

Check your credit rating and review your credit report for inaccuracies. You can get one from each of the three credit bureaus (Experian, Equifax, and TransUnion) or from AnnualCreditReport.com . You are entitled to your credit report at least once per year.

Your credit report can help you understand how your debt is affecting your credit score. You can see if you have a significant number of late payments or if you have a high credit utilization ratio, meaning you use a large amount of the debt available to you.

If your credit rating allows for it, try to get a larger, lower-interest loan and  consolidate your debts  into this loan. This can speed up the process of paying off your debt by minimizing the interest.

You may  consider a balance transfer offer  of 0% interest from one of your credit cards. This way, you can get  grace period  from that could last anywhere from six to 18 months, depending on the offer. Be aware that if you don't pay the balance off in full before the offer term ends, you will pay the credit card's interest rate on the balance.

If you own a home and have equity, you may be able to use a home equity line of credit (HELOC) to pay off higher-interest debt. Lines of credit have significantly lower rates than credit cards.

Whenever possible, double the amount of payments you make to your debt, especially for high-interest debt. Paying more than the minimum can speed up the time it takes to get out of debt.

By increasing your payment amount , you will be increasing the overall rate at which your debt declines and reducing the total interest you pay.

Cutting back on unnecessary expenses is a key part of getting out of debt. Review your regular expenses and identify which are necessary, such as food, housing, and utilities, and which are unnecessary, such as entertainment or clothing.

Reducing your unnecessary expenses can give you extra money to put toward getting out of debt.

Try to avoid closing your credit cards. Closing cards reduces the overall amount of credit available to you and increases your credit utilization ratio , both of which can hurt your credit score.

Meeting with a  credit counselor or financial advisor can help you understand all your options for getting out of debt. Professional advisors can guide you through the best strategies for your particular situation.

A credit counselor also may provide support when you meet with your creditors. However, be wary of credit specialists that charge high fees.

If you are still struggling to pay your debt with your income, you can take other measures. If you are behind on your payments, you can try debt settlement with the help of a reputable debt relief company .

With this strategy, you negotiate with lenders to reduce the amount of debt you owe in exchange for agreeing to pay a portion of your balance. However, one drawback to turning to debt settlement is that it can negatively affect your credit score for several years.

Investopedia / Ellen Lindner

How Can You Get Out of Debt and Save Money?

You can get out of debt and save at the same time, but you must budget and plan. First, always pay at least the minimum required payments on your credit cards and loans. Then allot extra money toward paying down more debt and saving, according to your goals. A debt consolidation loan or a balance transfer credit card can also help lower overall interest payments.

How Can You Get Out of Real Estate Debt?

If your mortgage debt is too high, there are a few steps you can take to help lower it. First, you may be able to refinance your mortgage for a lower percentage rate, depending on market conditions and what you can get approved for. You can also make extra payments toward the principal on your mortgage loan, which will reduce the length of your loan and lower your interest costs.

How Can You Get Out of Student Debt?

If you have multiple student loans, consider refinancing your loans into one payment with a lower interest rate. Research loan forgiveness programs if you have a federal student loan. It is difficult to include student debt in a bankruptcy filing.

If you can't get out of debt, you may have to declare bankruptcy , which can ruin your credit rating and make you ineligible for loans or credit for years. Consider all your options carefully and weigh their pros and cons. Consult a professional financial advisor for more specific guidance on your options for getting out of debt for your situation.

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How to reduce your debt

Getting out of debt is possible when you know what you owe and what you can do to repay it. If you’re ready to begin paying down your debt, start with these three steps.

Step one: Understand debt reduction strategies 

There are two basic strategies that can help you reduce debt: the highest interest rate method and the snowball method.

Highest interest rate method

This approach focuses on your debts like credit card and student loan debts with the highest rate of interest. The goal is to pay off the highest interest rate debt as quickly as possible, because it’s costing you the most. While it may not feel like you’re making progress, this method will help you eliminate your costliest debts first—which can save you money in the long run. 

Snowball method

This approach focuses on your smallest debt. The goal is to get rid it as soon as possible. You keep on making the minimum payments on all of your debts, and you put any extra funds you have toward paying off the smallest debt. This will help you pay it off sooner.

Once you’ve paid one smaller debt in full, dedicate that freed up money to the next smallest debt. This way, you create a “snowball” of payments as you eliminate each debt. Unlike the higher interest rate method, you’ll see progress quickly as you pay off smaller debts. However, you may end up paying more in the long run, as you won’t be focusing on the larger or more costly debts. 

Step two: Create your debt reduction plan

Download our debt reduction worksheet to put together a strategy that’s right for you. To use the worksheet, you’ll need copies of your bills and interest payment information. If you’re motivated by saving the most money while still paying off your debts, the highest interest rate method might be the right choice for you. However, if you’re motivated by seeing progress quickly, then you may want to consider the snowball method. Choose the strategy that’s best for your situation and put it into action. 

Step three: Organize your monthly bills

Understanding what you owe, and when, will help you manage your debt. You can use a bill calendar to keep all your information in one place as you tackle your debt. Use the bill calendar to see all your bills and plan when they’re due. Keeping track of your monthly expenses can help put you one step closer to reaching your goals.

Take control of your finances

The "Get a Handle on Debt" series gives you tools to manage your debt by budgeting smarter , paying your bills on time , tracking your spending , paying down existing debts, and earning extra income . You can also get money management strategies sent directly to your inbox by signing up for our "Get a Handle on Debt" boot camp.

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• Managing Your Debt

How to Manage Debt of Any Size

Know How Much You Owe

Pay your bills on time each month, create a monthly bill payment calendar, make at least the minimum payment, decide which debts to pay off first, pay off collections and charge-offs, build an emergency fund to fall back on, recognize the signs that you need help, frequently asked questions (faqs).

Everyone with even a little bit of debt has to manage their debt. If you just have a little debt, you have to keep up your payments and make sure it doesn’t get out of control. On the other hand, when you have a large amount of debt , you have to put more effort into paying off your debt while juggling payments on the debts you’re not currently paying.

Make a list of your debts, including the creditor, total amount of the debt, monthly payment, interest rate, and due date. You can use your credit report to confirm the debts on your list. Having all the debts in front of you will allow you to see the bigger picture and stay aware of your complete debt picture. Debt reduction software can make this process easier.

Once you have a handle on your debt and your income, you can calculate your Debt to Income ratio (DTI). This ratio tells you how much of your income is going toward debt payments. To find yours, divide your debt payments by your income, and multiply by 100. For example, $1,200 of monthly debt divided by $3,000 of monthly income is 0.4 x 100 = 40%. The lower this number is, the better, and tracking it can help you understand your finances more clearly.

Don't just create your list and forget about it. Refer to your debt list periodically, especially as you pay bills. Update your list every few months as the total amount of your debt changes.

Late payments make it harder to pay off your debt since you’ll have to pay a late fee for every payment you miss. If you miss two payments in a row, your interest rate and finance charges will increase.

If you use a calendaring system on your computer or smartphone, enter your payments there and set an alert to remind you several days before your payment is due. If you miss a payment, don’t wait until the next due date to send your payment, by then it could be reported to a credit bureau. Instead, send your payment as soon as you remember that it was missed.

A budget can help you stay out of debt , and it can help you climb out. It allows you to see how much money you earn and where that money is going. Create a bare-bones budget  that allows you to pay for necessities like your rent or mortgage and utilities. Set aside everything else to pay off your debt as quickly as possible.

Use a bill payment calendar  to help you figure out which bills to pay with which paycheck. On your calendar, write each bill’s payment amount next to the due date. Then, fill in the date of each paycheck. If you get paid on the same days every month—the 1st and 15th—you can use the same calendar from month to month. But, if your paychecks fall on different days of the month, you'll need to create a calendar every month.

If you can’t afford to pay anything more, at least make the minimum payment. Of course, the minimum payment doesn’t help you make real progress in paying off your debt. But, it keeps your account in good standing, which avoids late fees. When you miss payments, it becomes harder to catch up and eventually your accounts could go into  default .

While you're working on paying down debt, stop using credit cards. Start carrying cash instead. Stick to the budget you created and only buy what you can pay for with cash.

Paying off credit card debt first is often the best strategy because credit cards have higher interest rates than other debts. Of all your credit cards, the one with the highest interest rate usually gets priority on repayment because it's costing the most money.

Use your debt list to prioritize and rank your debts in the order you want to pay them off. You can also choose to pay off the debt with the lowest balance first. This might cost a little more in the long run, but knocking off small debts first can build confidence.

You can only pay as much on your debt as you can afford . When you have limited funds for repaying debt, focus on keeping your other accounts in good standing. Don’t sacrifice your positive accounts for those that have already affected your credit. Instead, pay those past due accounts when you can afford to do it.

Without access to savings, you’d have to go into debt to cover an emergency expense. Even a small emergency fund will cover little expenses that come up every once in a while.

First, work toward creating a small emergency fund—$1,000 is a good place to start. Once you have that, make it your goal to create a bigger fund, like $2,000. Eventually, you want to build up a reserve of three to six months of living expenses.

Don't Confuse Wants and Needs

It's easy to convince yourself that you "need" to purchase a new tv or that you "need" to go on vacation. The truth is, there aren't that many true needs in life. You  need  food, shelter, clothing, transportation, and things like that. You  want  steak, a nice house in the suburbs, designer labels, and a luxury car, for example.

If you find it hard to pay your debt and other bills each month, you may need to seek outside help, like a credit counseling agency . Other options for debt relief are:

• Debt consolidation
• Debt settlement

These each have advantages and disadvantages, so weigh your options carefully.

What is debt consolidation?

Debt consolidation is rolling your debts into a product that offers a single payment and a lower interest rate. Popular debt consolidation tools include personal loans and 0% interest balance-transfer credit cards.

What is debt settlement?

Debt settlement is when you negotiate with a creditor to settle your debt for less than you owe. Creditors will typically only settle debt that isn't current. If you stop making payments in order to settle debt, your credit score will drop due to the missed payments. You can hire debt settlement companies, but they charge fees for resolving your debt. You can settle debt on your own or consider another option like credit counseling.

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Debt Help That Actually Works

10 Min Read | Apr 2, 2024

Debt is tricky . It starts out innocent . . . just a few swipes here, and a few payments there—nothing you can’t handle, right? But one day, you realize it’s gotten a little out of control and you’re drowning in debt . The payments are getting harder and harder to make. And your paycheck? Psh, that thing doesn’t go quite as far as it used to.  

If that’s you, you’re not alone. And if you’re looking for ways to get help with that debt of yours, you’ve come to the right place.

Why Getting Debt Help Is a Good Idea

66% of Americans say they have consumer debt—and the average total per person is a whopping $34,055. 1 Oof . It’s time for some debt help, don’t you think?

But here’s the thing: True debt help is not instant or easy. And just like any get-rich-quick scheme, you should be suspicious of anyone who promises to solve your money problems with a snap of their fingers. (Debt probably didn’t become your way of life overnight, so it’s going to take some time to get back on your feet.)

Companies that offer  debt management  or  debt reduction  services almost never help you actually get out of debt because they don’t solve the one thing keeping you in debt— your spending habits .

Here’s the deal: Personal finance is 80% behavior and only 20% head knowledge. If you truly want to get out of debt and stay out of debt, you have to treat the root of your money issues, not just the symptoms. Even though your choices landed you in a tough spot, you have the ability to fight, kick and claw your way out of debt. You just need a game plan, and it starts with knowing what types of debt relief services will actually help you with your debt.

Debt Relief Services to Watch Out For

We said it before and we’ll say it again: Not all debt help is helpful. Yep—there are companies out there who make money off your desperation. Gross, right?

That’s why it’s so important to know what kind of debt help is actually helpful, which to steer clear of, and how you can demolish debt yourself. (It’s possible.)

1. Debt Consolidation 

Debt  consolidation  is a type of loan that rolls several unsecured debts into one single bill, usually to get a lower interest rate. The intent is to help you slash mounds of debt. But in reality, you end up staying in debt longer because the term of your loan is extended. The longer it takes you to pay off your loan, the more money you pay. That’s why we call it debt CON-solidation (get it?).

2. Debt Settlement

Debt  settlement  means you hire a company to negotiate a lump-sum payment with your creditors for less than what you owe. Debt settlement companies also charge a fee for their “service.” Most of the time, settlement fees cost between $1,500 to $3,500, which is way more than you would pay if you cut out the middleman and settled the debts yourself.

3. Student Loan Consolidation

We all know student loans are the  worst . So, it’s no wonder that most graduates going into their early career are feeling the heavy weight of those payments, especially if they’ve got multiple loans. When you’re eating ramen noodles for the fifth night in a row because you’ve got to pay your bill, any sort of student loan relief seems tempting—including consolidation.

For the record, student loan consolidation is the only kind of consolidation we recommend. It will roll all your federal student loan payments into one, and it can also help you trade in any variable interest rates for a fixed rate.

Pay off debt fast and save more money with Financial Peace University .

But consolidating won’t get you a lower interest rate overall, so you’re not really saving any money. And it tends to extend your loan—which means you’ll end up paying more in interest if you just stick to the minimum payment. It’s more a question of what will motivate you to pay off your loans faster.

So, even if consolidation gives you a little extra breathing room, don’t take your foot off the gas!

4. Credit Counseling

A credit counselor is someone who “helps” you come up with a debt management plan . They essentially become the middleman between you and your creditors, paying your bills for you, negotiating smaller rates on your loans, and combining your bills into one lump payment. Sounds nice right? Not so fast— credit counseling only works on certain types of loans. And you’ll want to watch out for those hidden “maintenance fees” too. Oh and P.S. . . . while the name implies counseling, the only one getting counseled is your debt!

5. Credit Repair and Debt Elimination Scams

In a world that revolves around the almighty FICO , it’s easy to come across companies that are ready to “fix” your credit report—for a fee. But the truth is, most of these repair companies are scams. They offer to take the negative information from your report (even if it’s accurate). 2 Psst. That’s illegal.

And debt elimination scams are similar. They offer to eliminate or drastically lower your debt for a large up-front cost. But all you’re paying for is falsified loan documents that aren’t tricking anybody. Yikes .

6. Bankruptcy

Sometimes your situation feels so desperate that bankruptcy seems like the answer. But it is not your only option.  Bankruptcy  is a gut-wrenching, life-changing event that causes lifelong damage. It also doesn’t guarantee that all your debts will be canceled. Bankruptcy falls into the same category as divorce—sometimes it’s necessary, but as a general rule, you should do everything in your power to avoid it.

7. Balance Transfers

Think a simple balance transfer from one credit card to another will help? Think again! It may seem like you did something to help your debt when you transfer it to a credit card with lower interest. But all it really did was trick you into thinking you’re better off than you were before. The only way to really help your debt is to get rid of it!

8. Personal Loans

Borrowing money to pay off debt is like trying to dig yourself out of a hole. A personal loan won’t solve your problem because it’s just moving your debt from one place to another. Even cash advance apps like the Dave app won't help you break the paycheck to paycheck cycle.

It’s time to stop thinking of debt as the solution and end the cycle of borrowing money for good. And if you’re thinking about borrowing money from family, don’t. The borrower is slave to the lender (see Proverbs 22:7), and you change the dynamic of a relationship when a loved one loans you money. Trust us on this—it’s not worth the trouble.  

Debt Help That Really Works

Don’t let debt back you into a corner. You  can  be debt-free! It’s time to defend yourself from the phonies selling false hope and learn how to knock out debt once and for all. Here’s a rule of thumb: If it seems too good to be true, it usually is. There’s no easy button when it comes to dealing with debt.

Your best bet is hard work, strong bootstraps (so you can pull yourself up), and the right person or plan to come alongside you as you walk toward freedom from debt once and for all.

If you’re fed up with the debt cycle and other debt relief services that bring nothing but stress (and even more debt), it’s time for a change . But in order to get a different outcome, you’ve got to do something you’ve never done before.

Here are three ways to start changing your money behaviors that will completely change your life (if you stick with it):

Use the debt snowball method.

The  debt snowball method  is a plan that’s proven to help you defeat debt—for good.

By listing your debts smallest to largest (regardless of interest rate) and attacking the smallest with a vengeance while making minimum payments on the rest, you will start to knock out more debt than you ever thought possible!

The debt snowball is the fastest way to get out of debt because it addresses behavior, not just math. It forces you to be more intentional with your money and gives you small wins that motivate you to keep going.

This method  changes lives ! And it can change yours too.

Find a good financial coach.

Unlike a counselor—who serves primarily as a mediator—a financial coach gets into the trenches with you. They’ll help you develop a plan to get out of debt and achieve your big money goals . . . all while encouraging you along the way.

Maybe asking for debt help is uncomfortable for you. Maybe your pride is as big as the state of Montana and you can’t imagine showing your bank statements to someone else. We get it. But if you really want to demolish your debt, it’s time to bring in a helpful third party that knows how to help you get out of the hole you’re in. We’re talking about a financial coach .

Sure, it may be awkward at first letting a stranger in on your spending habits. But it’s one of the best decisions you’ll make. Why? Because a financial coach is trained to get you from the deep end of debt to standing on the dry land of stability. Not only that, but they’ll also help you reach your financial goals and get to places you never thought you could go with your money.

Don't Go It Alone: Connect With a Financial Coach

A trained financial coach helps you navigate your money problems and make real money progress.

Change your life with Financial Peace University .

Think a money course will be boring? Think again. Financial Peace University is the debt help you need that will change your life for good. In nine lessons, you’ll learn how to save for emergencies, dump debt, invest for your future, build wealth, and give like no one else.

Listen, nearly 10 million people have gone through Financial Peace University and come out on the other side . . . winning with money. You're next.

You Have the Power to Get Out of Debt!

Attacking your debt with  gazelle intensity  will get you on the road to financial peace and allow you to build wealth faster than any debt reduction company ever will. No, it’s not easy. And it’s not quick. But it  is  worth it!

You are ultimately the only one responsible for your debt. It’s up to you to roll up your sleeves, change your spending habits,  make a plan for your money , and take action!

If you’re really serious about learning how to pay off debt fast and save for the future, Financial Peace University will show you how. Get this: The average household pays off $5,300 in the first 90 days on the plan. We aren't joking.

Pulling yourself up by your bootstraps will only get you so far. Start Financial Peace University and learn how to get out of debt (and stay out of debt)—forever.

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About the author

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

How the Debt Snowball Method Works

The debt snowball method is the fastest way to pay off your debt. You'll pay off the smallest debt while making the minimum payment on all your other debts, and gain momentum as each one gets paid off.

What Is Debt Consolidation?

Juggling multiple payments got you feeling like you’re in a circus? See why consolidating your debts can actually set you back even more.

How to consolidate debt without hurting your credit

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Key takeaways

• Debt consolidation puts multiple debts into a single account to make your payments easier.
• Debt consolidation can lower your credit score temporarily, but your score will improve if you make payments on time.
• Other tools like debt management plans and bankruptcy can help you manage debt.

You’re not alone if you’re carrying large amounts of debt across multiple credit cards and loans. According to the Federal Reserve Bank of New York , total household debt reached $17.5 trillion in Q4 2023. Credit card balances stood at $1.13 trillion. TransUnion reported that the average debt per borrower was $6,360 as of Q3 2023.

If you owe a lot of money on multiple credit cards and loans, debt consolidation can provide a way out. Unsurprisingly, there’s also a lot of misinformation and confusion about the process. What is the best way to consolidate debt? Is debt consolidation bad for your credit? Does the process really work? What are the possible drawbacks?

Debt consolidation doesn’t get rid of your debt, but it can help you pay it off efficiently. You should weigh the pros and cons and know how it will affect your credit score to decide if debt consolidation is right for you.

What is debt consolidation?

Debt consolidation lets you to roll debts into a single account. This process can make your life easier. You can merge multiple monthly payments to different creditors and lenders into one payment to a single source. Depending on the method used, debt consolidation can also help lower your overall interest rate.

You can consolidate your debt in a few ways. How you decide to consolidate your debt can change how your credit score is impacted.

Personal loans

A personal loan gives you a lump sum, which you can use to pay off your multiple creditors and lenders. You then repay that loan in monthly installments over months or years.

Personal loans generally have a fixed interest rate. The interest rate you owe (and the amount of money you can borrow) depends on your credit score and the lender you choose.

Home equity loans or HELOCs

Home equity loans and home equity lines of credit (HELOCs) are secured loans that use your home as collateral:

• A home equity loan is a second mortgage (at a fixed or variable interest rate). It gives you cash equal to a portion of the equity in your home.
• A HELOC is a revolving line of credit similar to a credit card or credit line. You borrow what you need from the line of credit, repay it and use it again when needed. How much you can receive is tied to your home’s equity.

Balance transfer credit cards

A balance transfer credit card lets you move existing debt from various credit cards to a single card. These specialized credit cards can offer a low or zero-introductory annual percentage rate (APR).

Does debt consolidation hurt your credit?

Debt consolidation can negatively impact your credit score. Any debt consolidation method you use will have the creditor or lender pulling your credit score, leading to a hard inquiry on your credit report. This inquiry will decrease your credit score by a few points.

However, this credit score decline is temporary. Making consistent, on-time payments on your HELOC, personal loan or balance transfer credit card will help boost your overall credit score over time. Credit bureaus like to see an on-time payment history. Those payments make up 35% of your overall credit score with FICO.

On the other hand, making off-and-on payments or completely missing payments are good ways to make a mess of your credit score.

Pros of debt consolidation

Managing your payments through debt consolidation can offer plenty of benefits , including:

• Faster debt repayment: The main advantage of consolidating debt is combining multiple monthly payments into a single monthly payment. This allows you to direct your payments to a single source. You won’t be paying many minimum payments. This process can help reduce your debt more quickly.
• Lower interest rates : Depending on your credit score, you could find yourself paying a lower interest rate through a debt consolidation loan or credit card transfer . A lower interest rate means more money stays in your pocket. That extra cash could help you pay off your debt faster.

Cons of debt consolidation

It’s also important to understand the downsides:

• Upfront costs : That personal loan or HELOC doesn’t come for free. You’ll have loan origination, application fees or closing costs if you’re using home equity. Balance transfer credit cards might also charge fees. These costs are either fixed or a percentage of the loan.
• Longer payoff terms : You could pay less per month with a debt consolidation plan. However, you might be paying this off over a longer time. If so, you might pay more in interest.
• Fees if you can’t make payments : If you miss even one payment on a debt consolidation loan, you could be dinged with a late fee. If your payment doesn’t go through because of insufficient funds, you might get a return payment fee.
• Damage to your credit score if you can’t pay : Once your payment is more than 30 days past its due date, your creditor or lender might report the omission to the credit bureaus.

How do you decide when debt consolidation is a good idea?

When considering a debt consolidation plan, it’s a good idea to consider a few important factors to decide if it’s going to work for you:

• Your credit score : One goal of debt consolidation is to reduce the interest rate on your debt. The idea here is to pay a lower interest rate on a consolidation loan or balance transfer credit card than you currently have. This is doable with a “good” credit score, which is at least 670 (FICO) or 661 (VantageScore).
• Your budget and financial goals : Debt consolidation could make your payment period longer. It can also provide a route to a specific, fixed monthly payment. This might be ideal if you’re working within a specific budget.
• Your ability to repay : Don’t get a debt consolidation loan unless you’re 100% sure you can repay it. Missing payments could drive you deeper into debt, and missed payments drag down your credit score.

What are the alternatives to debt consolidation?

If you’ve realized you might not be a good candidate for debt consolidation, there are other options to help pay down your debt.

Debt management plans

Debt management plans are offered by nonprofit agencies that work with creditors and lenders to negotiate more favorable terms for you. You make one monthly payment to the agency, which then pays your creditors. These agencies also help you formulate and follow a reasonable budget.

Debt settlement plans

Through debt settlement procedures , you negotiate directly with your creditors to reduce your interest rates, monthly payments or both. You can take the reins and do this on your own, or you can have a debt relief company do much of the work for you.

However, be careful when considering working with a debt settlement company, which can be an expensive option. Furthermore, if you work with a scam company, you could also have more debt problems than you started.

If all else fails, bankruptcy can help with your debt problems.

On the upside, bankruptcy can cancel what you owe, helping rid you of overwhelming balances and calls from creditors. On the downside, bankruptcy means attorney fees and remains on your credit report for a long time, anywhere from seven to 10 years.

Bankruptcy should be considered as a tool of last resort, only to be considered if all other attempts to reduce your debt have been exhausted.

The bottom line

It’s important to understand that debt consolidation doesn’t get you out of what you owe. You still need to pay your creditors and debtors. However, debt consolidation can help you redirect your financial resources and pay debt down more efficiently.

The key is determining the best way to consolidate debt for your specific financial situation. Then, dedicate yourself to making on-time payments and sticking with the process. When used correctly, this process can help you successfully pay off lenders and credit card companies while improving your credit score over time.

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6 ways to tackle financial stress

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For many Americans, financial concerns are ever present, especially given the uncertainties of today’s economy. While worrying doesn’t solve much, having a plan to manage financial challenges can help ease some of the stress. Plus, the monetary benefits of dealing with financial problems—paying off bills, saving more and reducing debt—can help improve your overall outlook. Here are some suggestions for tackling your money stress and taking control of your finances.

Identify top sources of financial stress

If financial anxiety is weighing on you, start by identifying the specific issues keeping you up at night. Whether the problem is credit card debt or upcoming bill payments, pinpointing the source of your stress will help you determine your next move .

Create a monthly budget

A budget is a powerful tool for taking control of—and understanding—your finances. It can help you avoid spending more than you have as well as save for future goals. Once you have a full picture of where your money is going every month, you can look for opportunities to redirect some of it to the areas causing your financial stress.

There are lots of apps and online tools to help you track spending or set up a budget. If you have an account with Bank of America, consider using the Spending & Budgeting tool .

Make the most of your income

When money is tight, you may think you don’t have enough to deal with your financial problems. However, it’s important to make the most of the income you do have. Know that small steps add up. You may not be able to cut any one expense by $500 a month, but you may be able to identify five that you can cut by $100 each.

Article continues below

Build an emergency fund.

Having money set aside for an emergency—such as car repairs, job loss or illness—can go a long way towards relieving financial anxiety. However, building an emergency fund can seem overwhelming, especially one with enough to cover three to six months of expenses. Don’t get hung up on the amount—what’s important is that you’re consistently setting money aside.

Bank of America offers a Savings Calculator to help you see how much time it could take to hit your savings goal.

Be strategic about reducing debt.

Credit card debt is a common source of financial stress. Not only is it expensive—it can also get in the way of your savings goals. The anxiety antidote: a plan to pay off the debt . If you have balances on multiple cards, consider using the snowball method (paying off your debts one-by-one, focusing on the smallest first) or the high-rate method (concentrating on the cards with the highest interest rates first).

Consider outside help

If you’re not satisfied with your progress in reducing debt, you may want to seek help from trusted resources, such as the Federal Trade Commission and the National Foundation for Credit Counseling. Or if you want guidance on long-term goals, such as saving for retirement or college, financial advisors can help. Finally, your friends and family may be able to offer support—just make sure to set clear boundaries and expectations to avoid damaging those relationships.

The material provided on this website is for informational use only and is not intended for financial or investment advice. Bank of America Corporation and/or its affiliates assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment management. ©2024 Bank of America Corporation.

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Financial Mentor

Invest smart. build wealth. retire early. live free., how to consolidate debt, the smart way, debt consolidation can save you money by paying off debt sooner — if you avoid certain mistakes..

• Debt consolidation can be a powerful tool to get out of debt faster.
• Even if you're financially secure, debt consolidation may save you thousands.
• Use caution; common mistakes can make your debt problem worse.

Sometimes, debt takes on a life of its own.

Even if you're responsible with money, surprises can catch you off guard and, before you know it, one loan turns into an insurmountable pile of debt.

It’s easy to get in over your head.

If you're paying what you can, but your loan or credit card balances are barely moving, it can feel like you’ll be in debt forever! This is just one of the reasons people find it so difficult to get out of debt .

Get This Article Sent to Your Inbox as a PDF…

Should I Consolidate Debt?

Debt consolidation may be a good option for you if:

• You have the income and credit to qualify for a new loan, and
• You can meaningfully reduce the interest rate on your debt by consolidating.

Consolidating debt can relieve some of the pressure on your budget, or simply reduce the number of creditors you need to pay each month. In many cases, consolidating your outstanding debt into a single loan can lower your monthly payments, save you money on interest, or both.

However, not all consolidation loans are created equally. There are many alternatives, each with their own pros and cons. The option that's right for you will depend on:

• What kind of debt you have
• The total amount of your debt
• Your creditworthiness and income

Read on to get all the information you need to decide which type of debt consolidation is best for you. We'll also cover exactly how to get started and offer some tips for avoiding the most common debt consolidation mistakes.

What is Debt Consolidation?

Debt consolidation is simply the process of taking out a single loan or credit card and using the proceeds to pay off multiple loans or credit card balances.

The two types of debt that are most commonly consolidated are credit card debt and student loan debt. But, you can also use debt consolidation for payday loans, personal loans, or medical bills.

It’s important to note that debt consolidation doesn’t reduce the amount of debt you owe. In fact, if you pay transfer fees or loan origination fees, you may end up owing more than you did when you started. However, in most cases, the benefits of consolidation make the upfront costs worthwhile in the long run.

Benefits of Debt Consolidation

You may wonder why you should bother with the hassle of consolidating your debt, especially when you’ll likely end up paying extra fees? There are actually several very compelling reasons. Let’s look at an example.

Related: Here’s a scientific system to build your wealth now

Imagine that you had five credit cards totaling $20,000 in outstanding debt. For this example, we’ll assume the interest rates averag 18.5% and the minimum monthly payments for all five cards totaled $500. In this case, it would take you five years to pay off your debt.

Now, imagine that you’re able to take out a $20,000 loan with a 5-year repayment schedule and a 10% interest rate. Your new minimum payment would be approximately $425 for the same debt and same repayment period.

The new, lower payment gives you two options to solve your debt problems:

The first is to use the monthly savings of $75 to give yourself a little bit of financial breathing room.

This might be the best option if you didn’t have enough cash flow to keep up with your previous $500 monthly payment.

The second option is to continue paying $500 per month so that you can pay off your loan even sooner.

How would these choices impact you?

In the first scenario, you would have an extra $75 per month to support current lifestyle so that you hopefully don't accumulate additional debt, while still saving $900 per year in interest payments. Over the five-year period, you’ll save $4,503. This is a huge benefit, but what if you went one step further and used the extra money to increase your loan payment? This would put you back at your original $500 per month payment while shaving an additional 0.9 years off your repayment schedule. This would allow you to pay the loan off in just 4.1 years and save $1,067 over the life of the loan.

These numbers will obviously vary for each person's individual scenario, but you can see what a huge difference consolidation can make. If you want to see what your consolidation numbers would look like, check out our debt consolidation calculator .

Another advantage is you’ll enjoy the freedom and convenience of dealing with one single loan instead of trying to juggle five credit card payments. It makes life easier, and it reduces the very real risk that you'll miss a payment, incur late fees, and tarnish your credit.

Depending on your credit history, debt consolidation may also give your credit score a much-needed boost. Once you’ve consolidated to a single loan and establish a track record of on-time payments, you should see a positive improvement in your credit score over time.

Now that you understand the benefits of consolidation, the next step is figuring out exactly how you’re going to consolidate that debt.

There are multiple options so it's important to weigh the pros and cons of each to decide which is best for your situation.

5 Methods for Consolidating Debt

The five most popular debt consolidation options are:

• Home equity
• Personal loans
• Credit card balance transfers
• Student loan refinancing
• Debt consolidation services

1. Home Equity or Mortgage Refinancing

If you're a homeowner then consolidating your debts with a home equity loan or line of credit (HELOC) is likely to be the least expensive option. Home equity loans typically offer lower interest rates than most other loan types because you’re putting your home up as collateral.

In some cases, you may also be able to refinance your mortgage for more than you owe and withdraw the difference as cash to pay off your debts.

However, both of these are options are risky propositions. You’re converting unsecured debt into secured debt.

Related: Why you need a wealth plan, not a financial plan.

If you stop repaying a credit card, personal loan, medical bill, or any other unsecured debt, your creditor will have to sue you to attempt to collect the unpaid balance. They might be successful, they might not. However, even if they're successful, the worst that can happen is a judge will place a lien on your property or garnish a percentage of your wages.

Home equity loans — just like mortgages — are secured by your home, which means if you're unable to make the minimum monthly payments then the lender can foreclose on your home . Until the loan is paid off, the bank has the legal right to the value of your home, and can take it once certain conditions are met.

Therefore, while home equity can be an inexpensive way to consolidate debt,  you’ll only want to consider this option if you’re absolutely sure you have sufficient cash flow to easily meet the monthly payment requirements. If not, it's not worth risking the roof over your head.

If you want to explore home equity or refinancing as a debt consolidation option, LendingTree is a convenient website to obtain no-obligation rate quotes for all kinds of mortgage products. Get your personalized rates in 5 minutes here.

2. Personal Loans

Personal loans are the fastest-growing type of unsecured debt. Since these loans aren't backed by collateral, the rate you’ll pay (and whether you’ll get approved at all) will depend in large part on your credit score. They’re an excellent option for consolidating multiple loans, particularly if you already have good credit.

You can get personal loans through banks, credit unions, personal finance companies, peer-to-peer lenders, and through online direct personal loan lenders like these .

If you have excellent credit, direct online lenders often offer great rates, fast approval, and prompt delivery times. In some cases, they can approve and transfer funds in as little as a day or two.

If you have poor credit, direct online lenders will also offer the best chance of approval, but they may be willing to loan less money and will inevitably charge higher interest rates than you're already paying, which defeats the largest benefit to consolidation.

If your credit is somewhere in the middle — okay, but not great — then a local credit union may offer a better chance of approval at a fair interest rate.

If you're curious about whether a personal loan could help you consolidate debt, these websites will show you the best personal loan rates, loan amounts, and monthly payments based on your individual situation. They're free to use, do not affect your credit score, and come with no obligation to apply for a loan.

Learn more about how to use personal loans responsibly in our complete guide.

3. Balance Transfer Credit Cards

If you're looking to consolidate credit card debt and only owe a modest amount, a 0% balance transfer credit card could be the right answer for you. However, approach this option carefully.

Credit card balance transfers are usually best when you owe no more than a few thousand dollars.

The zero-percent rate is offered for a set period of time (usually between 12 and 24 months).

If you haven't paid the balance in full by the time the offer expires, the remaining balance will be subject to the credit card's regular interest rate, which can be quite high.

Most cards also charge a balance transfer fee that amounts to between 3 and 5 percent of the balance transferred.

Before considering using a zero-percent interest rate offer, make sure you read all of the fine print and understand every detail. Then, figure out the payment schedule you’ll need to adhere to in order to ensure you can pay your balances in full before the promotional period ends. If you want to be safe, plan to pay the total off at least one month before the deadline.

Is Your Credit Card Costing You Too Much?

Whether you're paying off existing debt or considering using a credit card to finance a new purchase, you may be able to save hundreds---even thousands---by taking a minute to shop for the best credit card for your situation .

Visit our partner, Cardratings , to compare balance transfer credit cards which offer 0% intro APRs for 18 months or more on transferred balances. Likewise, if you're considering financing a new purchase, see the top 0% intro APR credit cards offering 12 months or more of interest-free financing.

See The List Here →

Need longer than two years to pay off an existing debt or a new purchase? A fixed-payment personal loan may charge less interest than a credit card. See our list of the best personal loans for debt consolidation.

4. Student Loan Consolidation

Most people graduate from college with multiple student loans. These loans often have different interest rates, terms, and repayment periods. Keeping track of them all is a hassle and consolidating them will almost always put you in a better financial position.

Federal Student Loan Consolidation

If you only have federal student loans, you may consider consolidating them using a Direct Consolidation Loan through the U.S. Department of Education. Doing so can also give you access to additional loan repayment plans and certain loan forgiveness programs. In many cases, you’ll also be able to remove the uncertainty of variable rate loans by consolidating them into a fixed-rate product.

Before moving forward with this, however, you’ll want to take a close look at the terms of your current loans and make sure you won’t lose any valuable benefits or credits by transferring your balances to a new loan. It’s also important to note that this option only works for Federal loans. If you have private loans or a mix of the two, then you’ll need to explore working with a private lender.

Private Student Loan Refinancing

Consolidating student loans through private lenders is often referred to as refinancing. This option could help you get a better interest rate, but you may find that it’s also more difficult to qualify.

Since Federal loans offer favorable repayment plans and forgiveness programs that you won't find with a private lender, you’ll want to think twice about rolling them into a private loan. It may still be a good idea if the rate is significantly lower and you don’t need these types of options. Before making a decision, you’ll want to ensure that you understand everything completely and weigh the pros and cons carefully.

If you only have private loans, then consolidating them through a new private lender will work in much the same way as consolidating credit cards using a personal loan. Many banks and credit unions offer student loan consolidations. However, online direct lenders are often the best choice. There are many websites available that allow you to compare offers from various lenders, which is a smart thing to do before you make your final decision.

5. Debt Consolidation Companies

There are various names that “debt consolidation” companies operate under. They may call their product debt consolidation, debt management, credit counseling, or a number of other things.

These companies should be considered an absolute last resort. If your credit is poor enough that you cannot qualify for other kinds of debt consolidation, using one of these firms may keep you out of bankruptcy, but it will cost you.

You should also know that these companies often don’t consolidate your debts into one loan. Rather, they serve as a middle man between you and your creditors. You send the company one monthly payment, and they distribute it among your various loans and credit cards. Sometimes, they can negotiate lower interest rates or minimum payments with your lenders. But, you must pay them a hefty monthly fee for using their services, which can offset any negotiated savings.

Finally, using these companies will almost always have negative consequences for your credit in the short-term. That's because your creditors will report to the credit bureaus that you are repaying your debt under modified terms, which goes on your credit report as a negative remark.

While some debt consolidation companies are reputable, there are also a ton of debt consolidation scams out there. If you decide to pursue this option, be very careful. Do your research, ask a lot of questions, and always trust your gut.

Is Debt Consolidation Always a Good Idea?

Although we’ve discussed the many benefits of debt consolidation, it’s important to note that there are situations when it’s not a good move. Generally, you’ll only want to consolidate your debt if the new loan will give you a lower payment and/or a lower interest rate.

Remember, also, that your new loan may offer you a lower payment simply by extending the amount of time you have to repay your loan. The longer you hold debt, the more total interest you’ll pay. That’s why it’s better to pay more than your minimum payment each month.

Related: How to take back control of your portfolio

Getting out of debt is always a challenge, in part because it requires planning, discipline, and some major lifestyle changes. While consolidating your debt is an excellent first step towards financial freedom, it won’t do you any good if you aren’t prepared to follow through.

5 Debt Consolidation Mistakes to Avoid

Make sure you get started off on the right foot by avoiding the most common mistakes people make when consolidating their debts.

Mistake #1: Not Learning from the Past

If you’ve accumulated more debt than you can comfortably handle, the first step is to look at how you got there . You have to solve the underlying spending problem. That means committing to fundamental changes in how you handle money or reducing lifestyle because the alternative is to end up in the same situation again.

Now is also a great time to look back at your spending habits and identify triggers. Do you tend to impulse-buy when shopping online? Do you spend more than you can afford on gifts for loved ones, or eat out at expensive restaurants more often than you should? Once you notice patterns, you can make conscious efforts to change them so you don't charge up new debt.

Mistake #2: Forgetting to Set Up An Emergency Fund

After you’ve consolidated your debt, it’s easy to become hyper-focused on paying it down. However, it’s important not to neglect savings. Without an emergency fund, one little incident can easily throw you back into debt.

While you’ll want to commit to paying as much as you can on your outstanding loan balance, make sure you also set aside at least a little bit for your emergency fund each month. The general rule of thumb is to keep the equivalent of three to six months of fixed expenses in a liquid account. If you have at least a few hundred dollars saved up, this can keep you from having to turn to credit cards when something unexpected comes along.

If saving seems impossible, there are a number of personal finance apps that can help you track your expenses and budget , and even some so-called microsavings apps that use technology to automatically help you start saving small amounts.

Mistake #3: Racking up New Debt

If you consolidate credit card debt, it’s also absolutely critical not to run those card balances back up. Consolidating all of your outstanding balances into a single loan will ultimately free up thousands of dollars in credit. Do not use it!

If you fall back into your old charging habits, you’ll end up with twice the amount of debt and far fewer options for digging yourself out again. This is a recipe for disaster.

Choose one credit card with a low rate and no annual fee and hold onto that for emergencies. Then, cut up the rest so you’re not tempted to use them. If you don’t think that’s enough to keep you from accessing the credit, consider closing the cards. While closing credit cards can pull down your credit score , it may be worth it if it helps you control excess spending.

Mistake #4: Failing to Have a Plan

You’ve heard the cliché “Failing to plan is planning to fail.” This is particularly true when it comes to paying down your debt.

It’s important to remember that debt consolidation isn’t the same as debt elimination. When you consolidate your loans, you’re simply rearranging them. To make serious strides in getting yourself out of debt, you need to change the way you think about money. This includes tracking your budget and coming up with a plan to help you spend less, save more, and only pay cash for future purchases.

Sometimes, making real progress will require hard decisions. Start by ruthlessly cutting out unnecessary expenses including dining out, grabbing coffee on your way to work, and maybe even that Netflix subscription. Small spending cuts may not seem like a big deal, but when taken together over time, they can accumulate into significant savings.

If you don’t have enough income to make your plan work, then consider selling some unneeded items, picking up a side job, getting a roommate, or even downsizing your home.

Mistake #5: Not Tracking Your Progress

Do the calculations so that you know exactly how much you need to pay each month and when your debt will be paid off. Your repayment period will likely span over several years, so it’s important to check in once in a while to make sure everything is still working according to the plan.

Related: The science of investment strategy – simplified!

Consider using a free cash flow tracking app like Personal Capital to monitor your expenses. If you use a credit card for online purchases or emergencies, make sure you pay it off in full each month. Tracking your spending and checking your debt and savings balances at least once a month will help you quickly notice when you start to stray from the plan. This will allow you to make proactive changes before they compound into a real problem.

Final Thoughts

When used correctly, debt consolidation is an extremely valuable tool. Whether you’re in over your head with outstanding debt or you just want to make the smartest possible financial moves, it’s worth learning how consolidation can help.

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How to Settle Credit Card Debt

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Settling credit card debt is a potential option when you have many missed payments over several months. If a credit card issuer or collection agency suspects they won't get paid at all, they might be willing to accept less money than you owe. It’s typically a last resort to be explored after you’ve considered other debt-payoff options .

“Whether or not you can settle depends on each creditor; no two banks have the same collection process or settling parameters,” says Leslie Tayne, founder and managing director at Tayne Law Group. “The outcome can depend on many factors, including the creditor's policies, the debt amount, the individual's credit history, and the ability to negotiate effectively.”

Here’s what you need to know about how to settle credit card debt.

» MORE: Debt settlement is usually a bad alternative to bankruptcy

Note that settling credit card debt is different from — and riskier than — simply negotiating the cost of existing debt , such as attempting to get fees waived or APRs lowered.

Pathways for credit card debt settlement

There are different options for settling the debt on your credit cards. You can try the do-it-yourself method or have an attorney or company settle debt on your behalf. Regardless, there is no guarantee that the company that owns the debt will be willing to settle. Be wary of anyone offering debt settlement services who promises these results. Many people in their desperation to settle debt are left vulnerable to scams by debt relief companies or other sources. Before hiring anyone to settle debt on your behalf, research their background, history and track record.

Do it yourself

When deciding whether to settle debt on your own or hire someone to negotiate on your behalf, it’s worth considering the pros and cons for both. Hiring someone can cost more, but settling debt on your own can be a risk. The law can come into play, and if you don’t know what to look for, you could dig yourself deeper into debt and spend more money down the line to fix those mistakes. Consider your options and what is best for your situation.

» MORE: Debt settlement: How it works and the risks you face

Hire an attorney experienced with debt settlements

An attorney who specializes in debt settlement can help you consider factors like federal and state laws, statutes of limitations for debt , time-barred debts , whether you’re judgment-proof or have a lien due to other debts, credit reporting, and tax outcomes, among other things. They may also understand how certain creditors or collections agencies work and the kind of offers they are willing to accept.

It can be difficult to wrap your head around attorney costs when you’re already struggling to meet payments. It might be possible to find an attorney who offers reduced costs through a legal aid office, but they can be in high demand. Costs for a private attorney may vary based on the type of work involved. They may charge a flat fee per creditor, a percentage of the debt eliminated, or an hourly rate. Attorneys are in theory held to ethical standards, but some have been known to not charge fairly. When hiring an attorney, it's in your best interest to do an online search for consumer reviews, consumer complaints, actions taken by the Consumer Financial Protection Bureau (CFPB), and the attorney's standing with the state bar.

Hire a debt relief company

A debt settlement or relief company is an option, but it can come with risks and steep costs. These companies generally charge excessive fees and rarely deliver on the promised results, leaving you worse off financially, according to the CFPB’s website. You’re typically required to stop paying your balances and instead put that money into a savings account. As a result, you’ll incur late fees, penalty interest rates and potentially other charges. Pricey service fees may also apply for the debt and the savings account, which can be counterproductive if those costs cancel out the value of any balances settled. Some creditors may also refuse to work with certain debt relief companies.

If you choose to work with a debt settlement company, the CFPB’s website suggests contacting your state attorney general or a local consumer protection agency to see whether the company has any consumer complaints on file. Some states also require debt settlement companies to be licensed. You can verify if a company is licensed through your state’s regulator or attorney general.

How to determine if settlement is right for you

If your credit has already taken a hit because of missed payments for six months or longer, debt settlement is an option to consider, according to Tayne, but it’s not without drawbacks. Beyond the credit repercussions of missed payments, this option can leave a lasting mark.

“On a credit report, a settled account is identified as being ‘settled for less than the full balance,’” said Margaret Poe, head of consumer credit education at TransUnion credit bureau, in an email. “The settled account will remain on a credit report for seven years from the date of first delinquency, as with other derogatory remarks on a credit report.”

Even if you are able to settle debt, the journey toward that agreement may be packed with pitfalls. You should prepare to receive calls from your creditor or a debt collector as payments become past due. The costs will also keep spiraling as interest and fees continue to accrue. And, as you’re missing payments, it’s possible to get sued by the creditor or collection agency.

It’s a big risk to take when there’s no guarantee that you can settle debt.

How to negotiate a credit card debt settlement yourself

Negotiating a credit card debt settlement isn’t a one-size-fits-all approach, so the following steps may not work for everyone, and they don't factor in other possible debts. You'll need certain financial resources to settle debt. If you’re having trouble covering essentials like housing and food, consider bankruptcy as a potential option.

1. Consult an expert

Before trying to negotiate yourself, it may be in your best interest to consult an expert early in the process. An expert may alert you to blind spots. You don’t have to hire an expert or a company for the long term if the costs are overwhelming, but at the very least you can understand if you should go at it alone or consider other options like a debt management program .

You can get an initial consultation with an attorney or a certified credit counselor. The latter will be more affordable, but credit counselors aren't very involved in the settlement process. What they can help with is exploring your options and helping you gain an understanding of whether a do-it-yourself approach is a good idea.

“We can obviously help with the budgeting process and thinking about, you know, other possible ramifications,” says Thomas Nitzsche, senior director of media and brand at Money Management International, a nonprofit credit counseling agency. “If a debt management program is not viable, the counselor is going to tell you that you really need to seek legal advice.”

An attorney will be more familiar with the settlement process. Unless you hire an attorney to represent you, though, that person can only offer general advice that may not be specific to your situation. Regardless, both experts are skilled at negotiating credit card debt, so it’s wise to at least consult one.

2. Figure out whom and how much you owe

Understanding who owns your debt is crucial. You can get some of that information in your free credit report from annualcreditreport.com , according to Tayne. But the report may not account for all of your debt in some cases. Judgments or liens don’t always show up on a credit report. You can go to your county recorder’s office to get information about potential judgments or liens and use online directories to find statutes of limitations by state, she says.

These are the kinds of steps an expert can potentially help you plan or consider before starting the settlement process on your own, hence why we recommend the consultation step above first.

3. Know your budget

By giving your finances an in-depth look, you can see how much money is truly available to negotiate a settlement. Review your budget and statements to explore the possibility of eliminating unnecessary purchases like lapsed free trials or others. Also look for opportunities to swap products or services for less costly alternatives.

In your review, you’ll also need to assess the highest and lowest amount you can afford to pay in a settlement. Consider whether it's best to negotiate several payments or a lump sum.

The range should allow you to still prioritize essentials like rent, utilities, transportation, gas, food and anything else you may need. Ideally, you can negotiate for an amount that gives your budget room to breathe. Leave a buffer for potential emergencies and tax-related costs that may apply on debts forgiven over $600. Depending on your circumstances, it may be possible to get the tax costs waived, Tayne says.

» MORE: Free budget planner worksheet

4. Get organized

Once you know who owns your debt, look up contact numbers for those companies and write them down. You should also make a list of the debts, the amounts outstanding, and the range you can afford to pay back.

Here are some of the documents you may need:

Your budget and range for settlement.

Your credit report.

Documents concerning judgments or liens.

A script of what you’re planning to say.

A list of questions if a settlement agreement is proposed. 

Practicing what you’re going to say will also help you be more confident in the actual negotiation process. Don’t step outside the parameters of what you can afford, and don’t negotiate out of fear — even if the person on the other end of the call seems intimidating.

In case you are able to get a settlement agreement, it helps to have a list of follow-up questions. For instance, you may want clarity on the following:

When, if at all, can you get the agreement in writing?

How will the settled debt appear on your credit report?

What happens if you don’t honor the terms of the agreement?

Will you be taxed on the amount settled?

Will you get a 1099-C for the settlement, and if so, when?

5. Make the call

Once you’ve done your prep work, you’re ready to make the call to the creditor or debt collection company. Before dialing, here are some best practices to consider:

To prevent unwanted surprises, don't provide your bank account information upfront to the company that owns the debt. Wait until you have a signed agreement.

Write down the names of people you speak to and the time you spoke to them. 

Write down the numbers of departments before accepting a transferred call. 

Make as many calls as it takes to get through to the right person.

Start negotiations at the lowest offer possible (i.e., even if you can afford to pay 60%, start at 20%).

Once you’re ready to dial, ask to speak with an employee who can negotiate your debt. Start by asking, “I would like to settle my outstanding credit card debt. Can we discuss any options that you offer?” If you're asked why you can’t pay it off, avoid revealing too much information, to prevent it from potentially being used against you in the settlement process.

“What consumers tend to do is just dump on the creditor tons of information that impacts and impedes the settlement process,” Tayne says. “Somebody who is an attorney understands how to filter certain information in order to appropriately negotiate in the client’s best interest.”

Once you share that you’re struggling to meet payments, the account may be closed if it’s still with the original creditor.

Don’t be afraid to ask for more time to think about a settlement offer. Ask for the direct number so that you can pick up where you left off. Don’t agree to any terms or offers that are unclear or out of budget. Ask for clarification or a breakdown of costs, if needed.

6. Get the agreement in writing

Request the agreement in writing and carefully review it before signing to ensure it includes the terms you agreed to. You might be under the impression that you’ve settled debt, but it may not be the case until you get all of the necessary details in writing.

The agreement should include the name and number of the account settled, the name of the creditor, the date, and the terms depending on whether you’ll have different payment deadlines or make a lump-sum payment, according to Tayne. You can also feel free to request that credit reporting details be included and anything else that might be relevant or useful to document.

Don’t make any payments or share any bank account details until the agreement is finalized.

7. Honor the settlement agreement

It’s important to meet the terms of the new agreement. Failure to do so can result in a lawsuit and fewer opportunities to negotiate in the future, Tayne says. To avoid further complications, be sure to pay off any tax-related costs that result from the debt settled.

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How to get help with your credit card debt, according to experts

By Dori Zinn

Edited By Angelica Leicht

Updated on: June 6, 2024 / 10:39 AM EDT / CBS News

With the costs rising for nearly everything due to high and persistent inflation , it's no surprise that many Americans are turning to credit cards to help pay for essentials. But while this approach can help fill in the gaps in your budget, it comes at a hefty price. 

According to the Federal Reserve Bank of New York , Americans currently collectively owe $1.12 trillion in credit card debt — more than 13% compared to one year ago. And, the average American now owes almost $8,000 in credit card debt  despite annual percentage rates (APRs) on credit cards having almost doubled in the last decade. The average credit card rate is now close to 23% . 

These factors can make credit card debt hard to tackle. And, some cardholders are facing even higher credit card balances than the average, so it's important to know how to get help with this type of debt if and when you need it. 

Find out how the right debt relief program can help you today .

Here's how experts say you can manage your credit card debt — and where you can get help if you need it.

Take a realistic look at all of your debt

One of the hardest parts of facing your credit card journey is looking at the mountain of credit card debt you've accrued . But, it's also one of the first steps in managing it.

"Assess the full scope of the issue using each credit card's most recent monthly statements," says Markia Brown, accredited financial counselor and founder of The Money Plug. "These statements will give you the current balance owed and the assessed interest rate for each account. This information can help you identify which debt paydown strategy is best for you."

While your statements are an important place to look, they aren't the only place. Martin Lynch, president of the Financial Counseling Association of America (FCAA), says you should also take a look at your budget to make sure it's up-to-date.

"Make sure all of your income and expenses are accurately reflected, then prioritize those expenses to identify areas where temporary reductions can be made," Lynch says. "The key to the process is a flexible mindset. Recognizing that you can control your expenses by making temporary, beneficial changes can be very empowering."

Ready to tackle your credit card debt? Compare your options online here .

Craft a repayment plan for a DIY approach

If you want to take the do-it-yourself (DIY) approach, there are a few different ways to tackle credit card repayments on your own, including the debt snowball and debt avalanche methods . 

For both methods, you'll list all outstanding credit card debt, including how much you owe, the minimum monthly payment, the interest rate and the due date. You can do this on a spreadsheet or write it out by hand — whatever works best for you.

Debt snowball

The debt snowball method is when you make minimum payments on all of your outstanding debt and then put all of your extra cash toward the credit card with the smallest balance. You'll do this every month until the smallest debt is paid off in full. Then you'll move onto the next-smallest debt and continue until you've paid off all your credit cards.

Debt avalanche

Instead of focusing on the smallest debt first, the debt avalanche method prioritizes the debt with the highest interest rate or the largest balance. You'll make minimum payments on all your outstanding debt and put any extra cash towards the credit card with the highest balance or interest rate. Do this until your card is paid in full and then move onto the card with the next-highest interest rate or balance and continue until all your cards are paid in full.

Try to settle old debts and delinquent accounts

You may also want to pull your credit report for free at AnnualCreditReport.org and see if there are any delinquent accounts listed on your report. If there are, be sure to check and make sure those accounts are actually yours. If they aren't, you can report inaccurate and fraudulent accounts. But if they are yours, you may want to take some steps to negotiate those old debts .

"Some debt collectors will allow you to set up a payment arrangement, and some will even settle for less than what is owed," Brown says. "Whichever option you choose, make sure to get a written agreement signed by an agent of the company for your records."

If the delinquent debt is old, there's a chance your debt has already moved into collections. If that's the case, you can reach out to them to see what your options are. You can find that contact information on your credit report. 

"For most consumers whose debt has recently moved to collections, don't settle the debt, and don't promise more than you can actually afford to pay," Lynch says. 

Get professional help when you need it

For some people, tackling credit card debt requires a little bit of extra help from professionals . For example, some non-profits, like the FCAA, will offer free credit counseling to those who need it. 

"If you're maxing out your accounts and your high interest rates are breaking your budget, let our counselor lay out your options and give you the space to ask questions until you're satisfied," Lynch says. "We'll even create an action plan with you that's free."

Some borrowers might need tailored assistance through a debt relief company , like a debt management program, instead. These plans allow debt relief agencies to negotiate on your behalf to lower your interest rates or outstanding payments. 

There are other options too, like debt settlement programs , in which the debt relief company negotiates lower payment amounts on your credit card balances to settle what you owe. The rest of the debt is then "forgiven" by the creditor or the debt collector it was sold to.

But while these programs can be helpful in many cases, you'll have to pay a fee for this service. And that fee can vary widely based on the company you work with.

You don't have to work with a debt relief agency to get this type of relief, though. In some cases, you might be able to do it on your own. But if you do go the route of finding outside assistance, make sure you screen companies beforehand and keep an eye out for any red flags that could signal a scam.

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Best debt consolidation loans: your guide for 2024.

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Debt consolidation is when you take out one loan and use it to pay off other debts that you have, leaving you with one monthly payment and interest rate. This can help you manage your debt more efficiently, and in some cases, reduce the total amount of interest you'll pay if the new loan's APR is lower.

Generally, you'll need a personal loan for debt consolidation, which means replacing multiple loans with a single loan instead.

Our Picks for the Best Debt Consolidation Loans

• Best for good to excellent credit: LightStream Personal Loan
• Best for fast funding: Upgrade Personal Loan
• Best for high balances: SoFi Personal Loan
• Best for bad credit: Avant Personal Loan
• Best for fair credit: Payoff Loan™
• Best for loan options: Wells Fargo Personal Loan

How we rank debt consolidation loans »

Compare Debt Consolidation Loans

The best debt consolidation loans help you work toward paying off debt by bundling multiple debts into one account, and they're generally only a good idea if you can get a lower interest rate than your various debts carry. We looked at lenders that are best for fast cash, a variety of credit scores, and for high debt balances to come up with our list of top picks.

Best for Good to Excellent Credit: Lightstream Personal Loan

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LightStream offers some of the lowest rates on personal loans out there, provided you have a great credit score. The lender also has loans of up to $100,000 and can supply you with funding on the same day you apply and are approved.

• Loan amounts range from $5,000 to $100,000
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Lightstream is a highly regarded lender for many loan types, and has been a top pick across Insider's coverage of the best personal loans and best auto loans . However, this lender only works with borrowers with good or better credit, with a minimum credit score requirement of 660. 

LightStream offers consistently low personal loan interest rates , though its minimum interest rate for debt consolidation is higher than its typical personal loan's interest rates. However, this lender does not have any prepayment or origination fees. Same-day funding is available with LightStream. 

Watch out for:  Maximum loan amount limits. Only borrowers with excellent credit can borrow the $100,000 maximum, and anyone without excellent credit may not qualify for the full amount.

LightStream defines excellent credit as an account with five or more years of credit history, stable and sufficient income for debts, and a variety of credit history with little or no credit card debt. If you're looking for a debt consolidation loan, chances are you have a significant amount of debt, and may not fit these qualifications.

Additionally, LightStream doesn't have a way to pre-qualify online. You'll have to apply for the loan to find out exactly what your rates and terms could look like, which could make comparison shopping difficult. 

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Best for Fast Funding: Upgrade Personal Loan

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$1,000 to $50,000

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• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Quick access to funds
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Low minimum credit score
• con icon Two crossed lines that form an 'X'. Origination and late fees

Upgrade is a solid lender if you can qualify for its lowest interest rate. But if your credit isn't in great shape, you may be able to find a better deal elsewhere.

• Loan amounts range from $1,000 to $50,000
• Loan term lengths range between 2 to 7 years
• You can get your money within one business day after your loan is reviewed and approved
• Loans made by Upgrade's lending partners

Upgrade is great for fast cash because it allows you to get your money within one business day after your loan is reviewed and approved. 

You're also able to get a loan for as little as $1,000, which is less than many of the other competitors on our list. It could be a good choice if you only have a small amount of debt you need to consolidate.

What to watch out for:  Origination and late fees. Your origination fee will be late fee of up to $10 if you don't make a full payment within 15 days of your due date.

Upgrade Personal Loan Review

Best for High Balances: SoFi Personal Loan

0.25% AutoPay interest rate discount and a 0.25% direct deposit interest rate discount

8.99% - 29.49% fixed (with all discounts)

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. High maximum loan limit
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Unemployment protection
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. No fees required
• con icon Two crossed lines that form an 'X'. High minimum credit score requirement
• con icon Two crossed lines that form an 'X'. High minimum loan amount
• con icon Two crossed lines that form an 'X'. No in-person support

SoFi is a strong personal loan lender for those with high credit scores — you'll get perks like unemployment protection and no fees required. The best personal loan for you depends on your credit score, which will determine what you qualify for and can lower your rate.

• Loan term lengths range from 2 to 7 years
• Usually receive your money in a few business days after your application is approved
• Unemployment protection if you lose your job during your loan repayment, allowing you to apply for a three-month forbearance, up to a total of 12 months
• Loans are made by SoFi Lending Corp.

A SoFi personal loan is the best option for anyone with a high balance, as this lender makes debt consolidation loans of up to $100,000. Debt consolidation loans from this lender are comparable in rates to those offered by LightStream, but SoFi offers higher loan limits to all applicants, whereas LightStream only allows some borrowers to borrow up to $100,000. Similarly, SoFi doesn't have any application or prepayment fees as well as doesn't require an origination fee. 

SoFi offers unique features like unemployment protection, which could put loans in forbearance for up to three months if you find yourself out of work. 

Watch out for:  Stringent requirements. SoFi personal loans have a minimum credit score of 680. According to NerdWallet, the average income among borrowers is over $100,000.

SoFi Personal Loan Review

Best for Bad Credit: Avant Personal Loan

Offers emergency, home improvement, and debt consolidation loans

9.95% to 35.99%

$2,000 to $35,000

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Funds generally deposited by the next business day
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. No prepayment penalty
• con icon Two crossed lines that form an 'X'. Multiple types of fees
• con icon Two crossed lines that form an 'X'. High maximum APR
• con icon Two crossed lines that form an 'X'. Low maximum loan limit

Avant Personal Loan is a good personal loan provider, especially if you have a lower credit score and need to receive your loan money quickly. Just be prepared to pay a high APR if you do have a low score.

• Loan amounts range from $2,000 to $35,000
• Loan term lengths range between 2 to 5 years
• Administration fee of up to 4.75%, which will be deducted from your loan proceeds when the loan is funded, and late fee that varies by state
• Loans made by WebBank, member FDIC

Getting a loan with bad credit , whether to consolidate debt or for something else, can be expensive, or hard to qualify for. An Avant personal loan is the best bet for borrowers with poor credit, requiring a minimum credit score of 600.

Compared with other personal loan lenders offering debt consolidation loans for bad credit borrowers, Avant's terms are the most generous. While there is an administration fee, it could be lower than competitors' fees with a cap up to 4.75% in administration fees with an undisclosed late fee and returned payment fee. Avant also has the advantage of offering fast personal loan funding .

Watch out for:  High rates with a low credit score. While Avant is accessible to borrowers with poor credit scores, approval might go hand in hand with high interest rates on your loan.

Avant Personal Loan Review

Best for Fair Credit: Happy Money Personal Loan

The minimum rate for loan amounts above $15,000 is 11.75% APR

11.72% - 17.99% fixed

$5,000 to $40,000

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Competitive interest rates
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. No prepayment or late fees
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Low minimum credit score requirement
• con icon Two crossed lines that form an 'X'. Origination fees
• con icon Two crossed lines that form an 'X'. Slow access to funds
• con icon Two crossed lines that form an 'X'. Limited loan purpose
• con icon Two crossed lines that form an 'X'. Not available in all states

A Happy Money Payoff Loan personal loan is a great option for those with good credit scores who are eligible for the lender's lowest APR. However, borrowers can only use the funds to consolidate credit card debt.

• Loan amounts range from $5,000 to $40,000
• Origination fee anywhere between 0% and 5%
• Won't be able to get a loan from Happy Money if you live in Maine, Massachusetts, Nebraska, or Nevada
• Can only use for credit card debt consolidation
• Loans made by one of Payoff's lending partners

In the fair credit range, it can be tough to qualify for a personal loan with reasonable interest rates — many lenders have a minimum of 660 or 680. However, a Happy Money Payoff Loan™ could be a good option for people with credit scores as low as 640. Interest rates are comparable to those offered by LightStream and SoFi, but this lender has less stringent requirements. 

Compared with competitors Prosper and Best Egg , which both have the same 640 minimum credit score requirement, Payoff's interest rates are capped lower, and could have lower origination fees. 

Watch out for: Origination fees. Payoff offers loans with a 0% to 5% origination fee. Competing lenders Prosper and Best Egg charge 1.00% to 9.99% and 0.99% and 9.99% origination fees, respectively. The better deal will depend on your credit score, income, and repayment term.

Happy Money Personal Loan Review

Best for Loan Options: Wells Fargo Personal Loan

Relationship discount of 0.25%

8.49% to 24.49% (with relationship discount)

$3,000 to $100,000

Undisclosed

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Large maximum loan amounts
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Discounts for current customers
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Established brick-and-mortar lender
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. No origination fee or prepayment penalty
• con icon Two crossed lines that form an 'X'. Significant late fees
• con icon Two crossed lines that form an 'X'. History of mismanaging customer information
• con icon Two crossed lines that form an 'X'. No online applications for non-customers

Wells Fargo Personal Loan are a good choice if you need a significant amount of cash, as you can borrow up to $100,000 with the lender. However, if you're not a current customer, you can't apply for a personal loan without visiting a branch.

• Loan amounts range from $3,000 to $100,000
• Term lengths range from 1 to 7 years
• Rate discounts to customers who have a checking account with the bank and who make their loan payments automatically through that account
• Non-customers must apply by visiting a branch and talking with a banker
• Loans made by Wells Fargo, member FDIC

Flexibility makes Wells Fargo personal loan a top contender for best personal loans for debt consolidation. Wells Fargo separates debt consolidation loans from personal loans, but the interest rates are the same.

Benefits include competitive interest rates and an autopay discount of 0.25% if payments are made from a Wells Fargo account . For unsecured personal loans, the most common type for debt consolidation, there are no origination or prepayment fees.

Wells Fargo can send your loan funds to your Wells Fargo bank account, or to a credit account outside of Wells Fargo to pay down your debts directly. 

Watch out for:  Wells Fargo's history with data security and compliance. The bank has faced several federal penalties for improper customer referrals to lending and insurance products, and security issues tied to creating fake accounts several years ago. 

Wells Fargo Personal Loan Review

Which debt consolidation loan lender is the most trustworthy?

We've compared each institution's Better Business Bureau score to give you another piece of information to choose your lender. Whether you're considering a $5,000 loan or a $10,000 loan , a trustworthy lender can improve your loan experience. The BBB measures businesses based on factors like their responsiveness to customer complaints, honesty in advertising, and transparency about business practices. Here is each company's score:

With the exception of Wells Fargo, our top picks are rated A+ by the BBB. Keep in mind that a high BBB score does not guarantee a positive relationship with a lender, and that you should continue to do research and talk to others who have used the company to get the most complete information possible. 

Wells Fargo is currently rated an F by the BBB due to government actions against the business and a failure to respond to 14 complaints. Most recently, the Consumer Financial Protection Bureau in December 2022 ordered Wells Fargo to return $2 billion to customers and pay a $1.7 billion penalty for legal violations involving auto loans, mortgages, and deposit accounts. The bank illegally charged fees and interest penalties on auto and mortgage loans. Additionally, it misapplied payments to those loans for many customers. 

If you're uncomfortable with this history, you may want to use one of the other personal loan lenders on our list.

How to Choose a Debt Consolidation Loan

The main benefits of consolidating debt are streamlining your debts into a single account with one monthly payment and reducing the total amount of interest you'll owe.

When shopping for a debt consolidation loan, look for an APR that is lower than the average you're paying on the debt you want to consolidate. If you can't qualify for a lower rate, a debt consolidation loan might not be a good choice for you.

Also consider the loan amounts, associated fees and penalties, as well as a lender's credit score and other eligibility requirements when choosing a debt consolidation loan.

Personal Finance Insider's mission is to help smart people make the best decisions with their money. We understand that "best" is often subjective, so in addition to highlighting the clear benefits of a financial product, we outline the limitations, too. We spent hours comparing and contrasting the features and fine print of various products so you don't have to.

How to Qualify for a Personal Loan for Debt Consolidation

Qualifying for a debt consolidation loan is the same as it is for most other kinds of personal loans. 

Generally, lenders require a credit score in the mid-600s, although some will accept borrowers with lower scores. Remember, though, that with a lower credit score you'll pay a higher interest rate.

In addition to checking your credit score, debt consolidation companies will also need proof of your employment and ability to repay in order to determine eligibility. They will also check your debt-to-income ratio to make sure you haven't borrowed more than you can feasibly pay back.

Most lenders will allow you to prequalify for a loan, which allows you to compare interest rates and terms without affecting your credit score. 

How to Apply for a Debt Consolidation Loan

After you've gotten prequalified with several lenders, compare their offers and choose the one that best suits your needs. To complete the  full loan application process you'll need a significant amount of documentation, including things like: 

• Pay stubs/proof of income
• The last couple years of tax returns
• Documentation of 401(k)s and other financial accounts
• Rent/mortgage history
• Proof of collateral, if you're pursuing a secured loan

Get these basics in order before applying for the loan, in order to speed up the process. You can apply for most loans by filling out a form online.

If you are approved, the lender will send you the final loan documents to sign off on. These include all the details such as the interest rate, the amount of time you have to pay it off, the amount you're borrowing, the monthly payments, and any fees. Make sure you fully understand all of it before signing for the loan.

Alternatives to Debt Consolidation Loans

If you're looking for a debt consolidation loan because your credit cards carry high APRs, it's worth your time to consider some alternatives .

One often underutilized strategy is to simply ask your credit card company for a lower rate. There's no guarantee that they'll agree. However, they may well do so, especially if you've been diligent about payments. You can also ask about upgrading your credit card, which may come with a lower APR and other perks. 

You may also be able to get a lower rate by transferring your balances to a different credit card. Cards designed for this purpose often come with an introductory 0% APR period that can last anywhere from 12-18 months. Tackling your debt head-on using strategies such as the avalanche and snowball methods is another alternative.

We consulted loan and financial planning experts to inform these picks and give their insights into finding the best loans for your needs. You can read their advice at the bottom of this post.

• Andre Jean-Pierre , senior wealth advisor and managing director at Aces Advisors
• Forrest McCall , founder of Don't Work Another Day
• Fred Winchar , CEO and co-founder at MaxCash
• Ryan Wangman , former loans reporter at Personal Finance Insider

Generally, What Makes a Personal Loan Good or Not Good?

Andre Jean-Pierre:

"One of the most important factors to consider in a personal loan is the interest rate. Because personal loans are typically unsecured, they usually carry higher interest rates than secured lending options. However, if a person has a strong credit profile, a personal loan can carry a lower APR than other unsecured sources of financing such as credit cards."

Forrest McCall:

"One of the best ways to use a personal loan is to pay off other high-interest debts like credit card debts. Because you can often lock in lower rates than a revolving line of credit like a credit card it can be a smart decision for your finances and save you thousands in interest payments over time."

How Should a Borrower Decide if They Should Take Out a Personal Loan?

Fred Winchar:

"Whether or not to take a personal loan depends on if one can afford it. The purpose of the loan and the value that comes with it is of importance to note. In most cases, it is beneficial to use the loan to invest in a project that can bring extra income or savings."

Ryan Wangman: 

"Borrowers should carefully consider alternatives to personal loans before taking one out. Personal loans can come with high interest rates, especially for borrowers with poor credit. If you can't fit those monthly payments into your budget, steer clear of the loan."

Methodology

To find the best personal loans for debt consolidation, we combed through the fine print and terms of about a dozen personal loans to find the ones that were best suited to help with consolidating debt. We considered four main features: 

• APR range: For the most help with debt payoff, a personal loan for debt consolidation needs to have lower interest rates than the credit card or other debts you're consolidating. We looked for the loans that had the lowest rates possible for each credit range and purpose. The average credit card interest rate was 16.65% in the second quarter of 2022, so we focused on loans that had the potential to beat this. 
• Appropriate loan amounts:  We looked for personal loans that had the most variety in loan amounts. According to loan comparison site Credible , the median amount of debt consolidated in May 2020 was $18,000. To benefit the most borrowers, we included personal loans with maximum limits over $10,000. 
• Minimum credit score requirements: Where available, we considered the minimum credit score requirements for each company. We considered loans for excellent, fair, and poor credit, grouping loans into categories based on these credit score requirements.
• Fees:  We considered fees like origination or administrative fees in our decisions, looking for loans with the fewest or lowest fees. None of the best loans listed have prepayment penalties. 
• Nationwide availability: We only considered loans with availability in most or all 50 US states. 

See our ratings methodology for personal loans »

Personal loans are the most common type of loan used for debt consolidation. Other options for consolidating debt include a  home equity loan , a home equity line of credit (HELOC), and a balance transfer credit card .

When you take out a debt consolidation loan, the funds are used to pay down the debts you have with multiple lenders, leaving you with a single monthly payment to make. It does not erase your debt, and you might end up paying more over the long term even if  you end up paying less each month on the consolidation loan.

Your credit will often be boosted in the long run if you consolidate your debt because it can reduce the amount you owe and lower monthly minimum payments, which all affect your credit score. With a debt consolidation loan, you can benefit from a lower interest rate.

Most personal loans allow a variety of uses. While most include credit card consolidation or debt consolidation, not all do. Read the fine print of any personal loan you're applying for, and make sure that debt consolidation is an acceptable use of the proceeds. All of the loans we considered had an option to use the loan for debt consolidation, if not a separate loan, which we included details for. 

Editorial Note: Any opinions, analyses, reviews, or recommendations expressed in this article are the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any card issuer. Read our editorial standards .

Please note: While the offers mentioned above are accurate at the time of publication, they're subject to change at any time and may have changed, or may no longer be available.

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How to prepare for the dire consequences of u.s. debt.

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Marc Emmer is president of  Optimize Inc.  and an author, speaker and consultant specializing in strategy and strategic planning.

The U.S. economy has weathered the storm of the pandemic in part because of the swift and steady hand of the Federal Reserve. But in a world with escalating volatility and emerging risks including extreme weather events, cyberattacks and competition with countries like China, the Fed may not have the same ammunition for the next black swan event.

History is riddled with empires and nations that have expanded and contracted credit. These cycles have directly led to the rise and fall of economies — sometimes in productive ways, and other times through war or political unrest. 

The Fed has announced its intentions to pass on three interest rate hikes next year and dramatically scale back its bond-buying program. This is what the Fed’s monetary policy is designed to do: Provide liquidity when the economy is teetering, and cool things off when inflation emerges. But, we are becoming conditioned to accept interest rates that are artificially low. 

To give context, before the dot-com crash, the federal funds rate normalized around 5%. As of December, it was hovering at a historically low 0.25%. The 10 Year Treasury has been trading at around 1.7%. 

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These conditions could directly affect businesses if they lead to the eventual devaluation of the U.S. dollar and higher inflation; due to this, there are certain things that should be on your radar heading into the future. 

The Cost of Money

I see the Fed moving into uncharted territory, where many of its tools may be ineffective in the years ahead. According to the Congressional Budget Office, the U.S. debt will be $27 trillion by 2025 , and the debt-to-GDP ratio will swell to over 109%, or over $225,000 per household .

The U.S. has had the luxury of piling on debt because of a theory known as the debt overhang . The debt overhang presumes that if the economy is growing at a fast enough rate, tax receipts will outpace the government’s borrowing costs. However, as the U.S. continues to add debt , it will have to pay higher interest rates, as investors migrate to debt that is perceived as less risky. China, for example, has a debt-to-GDP ratio of 67. During the pandemic, industrialized nations with the highest debt loads such as Japan, Italy and Greece were among the worst-performing nations .

Far more troubling is where our country seems to be heading be in 10 years . Before the pandemic began, U.S. government projections called for all U.S. tax revenues to be consumed entirely by entitlements and interest by roughly 2031 . That was before the massive Covid stimulus, the infrastructure investment bill and any additional social programs the current administration may pass. In other words, the timetable for the U.S. to run out of money has accelerated.

The Medicare Part A trust fund is predicted to run out of money by 2026 , and a report says the social security reserve will be depleted by 2034 . Many state, local and private pensions are also underfunded.

Over the next decade, incoming tax receipts may only be sufficient to cover things like social security, Medicare, veterans’ benefits and other miscellaneous entitlements and interest payments. All discretionary spending, including military spending, will be deficit spending. 

Potential Ramifications Of Debt

The U.S. will have the following options available.

• Default on its bonds.

• Massive tax increases.

• Print more money.

• Cut all federal programs other than social security, Medicare, veterans’ benefits and interest.

• Cut military spending.

• Sell land, gold or mining rights.

I see these as all poor choices. Social security is considered the third rail of politics. Efforts to arrest Medicare inflation have only been marginally successful. Selling mineral rights during a time of greater climate change awareness would not be popular. Selling gold would be very destabilizing.

Recent proposals by this administration have focused on elevating taxes for those making more than $400,000 per year , which represents the top 1.8% of wage earners. Many believe this will not be sufficient to pay down the existing and resulting debt.

There are potentially a lot of challenges ahead of us in this regard. The most likely scenario is that the government will continue to do what it has historically done and is doing now — print more money.

If this happens and deficits mount, the most likely outcomes are devaluation of the U.S. dollar, much higher interest rates and possibly hyperinflation. Based on these possible outcomes, business leaders should prepare. 

What Business Owners Should Be Thinking About

• Purchasing currency hedges and other instruments that protect against dollar devaluations (versus other currencies).

• Securing long-term debt at low rates.

• Reevaluating their import versus export strategy-potentially limiting exposure to imports. 

• Protecting against inflation in hard assets such as gold and commodities (Note: We are not investment professionals and do not dispense investment advice.).

• Maintaining awareness of emerging blockchain and crypto technologies that will disrupt the banking system and become harbors of value.

• Minimizing holding cash that is depreciating in value during periods of inflation.

• Resetting expectations on enterprise valuations and their ambition to exit in the years ahead.

The import and export strategies you choose will depend on your industry, your percentage of imports, etc.

There may be some difficult days ahead; now would be the time to recalibrate where and how you store value.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

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Managing Your Money

Solving a debt problem, how can i solve this, consolidation.

Debt consolidation is when you take out a new loan to pay off two or more other loans. It’s important to note that while the interest rate on a consolidation loan may be lower, the repayment term is often longer than the terms of the original debts. The longer you take to repay, the more money you pay in interest.

Consolidation works only for people who are committed to paying off what they owe before they take on new debt. Often people who consolidate their debt, return to spending more money than they have. It’s important to be committed to a spending plan based on good financial health.

If you decide consolidation is a good option, talk to your bank or credit union and ask these questions:

• What is the annual percentage rate (APR)? The APR tells you how much interest you will pay in a year. Lower APRs are better than higher APRs.
• What kinds of fees will I pay? You may pay an application fee, late fees if you miss a payment deadline, and even fees for paying a loan off early (also called a pre-payment penalty).

Note: Debt consolidation loans are different from student loan consolidation. If you include a federal student loan in a private consolidation loan, you lose the benefits of a federal student loan . You can apply for a federal student loan consolidation loan at www.studentloans.gov .

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How to Solve Debt Problems

Home » Blog » How to Solve Debt Problems

Posted in Dealing with Debt

By Scott Schaefer, CA, LIT

Reading time: 3 minutes

When you are awake at night thinking of your debt problems….

When you are staring at your mail, wondering what bill to pay first…

When you are thinking of visiting a payday loan lender just to get through until next week…

Consider these ten key strategies to solve your debt problems.

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Yes, you can pay off your debt. Here are 9 key strategies to get you out of debt sooner.

• Make all your minimum payments. Paying the minimum won’t reduce your balances, but it will preserve your credit rating.
• Stop using credit. Don’t let your balances get any higher.
• If you can’t control your spending, leave your credit cards at home.
• Pay as much money towards your debt as you can.
• Save interest by focusing on high interest debt first.
• Double down on your payments. Once you pay off one credit card, apply that payment amount to your next debt.
• Put extra cash towards debt. You’ll benefit in the long run because you’ll reduce what you pay in interest.
• Should you cash in your RRSP? Cashing in existing retirement savings to repay your debt can have unexpected financial costs. We recommend speaking with a Licensed Insolvency Trustee before you take this step.
• Talk with a professional. Did you know Licensed Insolvency Trustees are the only federally regulated debt experts in Canada? An LIT is qualified to provide you with a range of options to deal with your debt.

Debt free in 30, it’s that simple.

Close Transcript

• Make All Your Minimum Payments.  Paying the minimum won’t reduce your balances, but it will preserve your credit rating. Make a list of every outstanding debt and set up a process to keep up with  at least  the necessary minimum payments.
• Stop Using Credit.  Stop building your credit balances even higher. Use cash instead of credit. Consider the convenience of debit as an alternative to credit cards.
• Take Control of Your Spending.  If you can’t control your spending, leave your credit cards at home. If your credit card company offers to increase your limit – say no. If discretionary spending is running your repayment plan, track your expense and cut back. Use gift cards to set spending limits at any one store.
• Pay As Much Money Towards Your Debt As You Can.  Paying down debt means paying less interest charges, freeing up money for other needs. The more you apply to debt repayment, the more money you’ll have available for other things.
• Recognize There are Barriers to Paying Down Debt. Debt has been a problem in Canada for years and more Canadians are suffering from debt vulnerabilities. Learn about the barriers you may be facing and how to overcome them.
• Pay Off High Interest Debt First.  Save money on interest costs by paying down high-interest debt like credit cards first. Paying less interest frees up money to pay off debt faster.
• Double Down on Your Payments.  Once you pay off one credit card, apply that payment amount to your next debt. By doubling up on your payments, your overall debt load will fall much faster.
• Put Any Extra Cash Towards Debt.  Apply any extra money you receive, like a tax refund, Christmas bonus or a gift of money, towards debt repayment. You’ll benefit in the long-run because you will reduce your interest costs.
• Should You Cash in Your RRSP or Savings?  Cashing in existing retirement savings to repay your debts can have unexpected financial costs and may not be the best strategy as this is money that should be reserved for your retirement. Most RRSPs are protected in a bankruptcy or consumer proposal. We recommend speaking with a Licensed Insolvency Trustee before you take this step.
• Talk With a Licensed Insolvency Trustee .  Did you know Licensed Insolvency Trustee (LIT) are the only federally regulated debt experts in Canada? An LIT is qualified to provide you with a range of debt relief options to deal with your debt and make a plan to build a better financial future.

Solve your debt problems.

Call us now at 1-866-747-0660 and get a free, no obligation debt consultation.

Debt Free in 30 – It’s That Simple

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• How Do I Know If I’m Insolvent?
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What To Know About Payday and Car Title Loans

What To Know About Payday Loans

What to know about car title loans, possible alternatives to payday and car title loans, what information to look for when applying for a payday or car title loan, special protections for military servicemembers, report fraud or deception.

Payday loans are small, short-term loans. They’re usually for $500 or less, and typically have to be repaid within two to four weeks. Also called cash advance loans, they are legal in many states.

To get a payday loan, you give the lender a personal check for the amount you want to borrow, plus the lender’s fees. Or, you authorize the lender to electronically debit the loan amount, plus fees, from your bank, credit union, or prepaid card account. If you don’t repay the loan on time, the lender can cash the check or electronically withdraw money from your account.

Payday loans are expensive. Lenders usually charge from $10 to $30 for every $100 borrowed. On a typical two-week payday loan, a fee of $15 per $100 translates to an annual percentage rate (APR) of 391%. The APR tells you how much it costs you to borrow money for one year. By comparison, in the first quarter of 2023, the average APR for credit cards was just under 21%.

Here’s how a typical payday loan works: You want to borrow $500. The lender offers you a two-week loan. The fee is $15 for every $100 you borrow. So your fee will be $75. ($15 x 5 = $75). You give the lender a check for $575, or you authorize the lender to electronically debit your bank account. The lender gives you $500 in cash. Two weeks later, you owe the lender $575. The lender will either debit your bank account, cash your check, or take cash or another form of payment from you, depending on how you agreed to repay the loan. The bottom line: You paid $75 to borrow $500 for two weeks.

Costs increase with rollovers. If you can’t repay the loan when it’s due, many lenders will let you extend the due date for another two or four weeks — but you have to pay the fee that's due, plus a new fee to extend the due date. It's called a “rollover.” Each time you roll over the loan, the lender will charge you a new fee and you'll still owe the entire original loan amount. With rollovers, the cost of the loan goes up very quickly.

Here’s how a typical rollover works: Using the example above, on the original due date you don’t repay the $500 loan. Instead, you pay only the $75 fee and roll over the $500 loan for another two weeks. The rollover will cost you another $75 fee. Two weeks after rolling over the loan, you still owe the lender $500 for the loan, plus the new $75 fee. The bottom line: The cost of the original $500 loan has gone from $75 to $150 due to the rollover.

If you roll over the loan several times, you may pay hundreds of dollars in fees and still owe the original amount you borrowed.

Car title loans, often just called title loans, also are short-term loans. They typically last 15 or 30 days. The loans use your car, truck, motorcycle, or other vehicle as collateral. They’re usually for amounts ranging from 25% to 50% of the vehicle’s value.

To get a car title loan, you must give the lender the title to your vehicle. Usually, you need to own the vehicle free and clear, but some lenders will take your title if you’ve paid off most of your vehicle loan. The lender will want to see the vehicle, a photo ID, and proof of insurance. Many lenders also want a duplicate set of keys for the vehicle.

If you get the title loan, you won’t get your vehicle title back until you repay the amount you borrowed, plus the lender’s finance charge and any other fees.

Car title loans are expensive. Title loans often have monthly finance fees as high as 25%, which translates to an APR of about 300%. Title lenders often add other charges to the loan amount, like processing, document, and loan origination fees. You also may have to buy add-ons, like a roadside service plan. If you have to pay added fees and buy add-ons, the cost of your loan will be higher.

Here’s how a typical car title loan works: You want to borrow $1,000 for 30 days. The finance fee is 25%. That means that you have to pay $250 to borrow $1,000. You give the lender the title to your car, and the lender gives you $1,000 in cash. When it’s time to repay the lender in 30 days, you must pay $1,250, plus any other fees the lender charges.

Costs increase with rollovers. If you can’t repay a title loan when it’s due, the lender may let you roll it over into a new loan. But rolling over the loan will add more interest and fees to the amount you owe.

Here’s how a typical title loan rollover works: Using the example above, on the original due date you don’t pay but instead roll over the 30-day, $1,000 loan for another 30 days. The rollover will add another $250 in finance fees, plus any other fees, to the amount you owe. That $250 is added to the $1,250 you already owe, so now you owe $1,500, plus any other fees that the lender may charge for the rollover. The rollover brings your cost of borrowing $1,000 for 60 days to at least $500.

You could lose your vehicle. If you can’t repay the money you owe, the lender may repossess your vehicle , even if you’ve been making partial payments. When you get the loan, some lenders insist on installing Global Positioning System (GPS) and starter interrupt devices so that they can locate the vehicle and disable its ignition system remotely, making repossession easier.

Once the lender repossesses your vehicle, they can sell it. In some states, lenders can keep all the money they get from selling the vehicle, even if they get more than you owe.

Here are some less expensive and less risky options to payday and car title loans:

• Ask your creditors for more time  to repay them. They may be willing to work with you. If they offer an extension on your bills, find out if they’ll charge you for that service — through a late charge, an additional finance charge, or a higher interest rate.
• Try to get a loan from a credit union. Credit unions typically offer lower interest rates than banks or other lenders, and some federal credit unions offer “payday alternative loans,” or “PAL loans,” for small loans. PAL loans are much less expensive than payday or car title loans. Some state-chartered credit unions offer loans similar to PAL loans.
• Visit a community bank. Local banks can offer smaller loans with easier repayment terms than many large regional and national banks. Talk with a small bank in your area to find out if you could qualify for a loan.
• Check with local branches of large banks in your area.  Some large U.S. banks now offer small loans or lines of credit to customers with low or no credit scores. The loans can be for up to $1,000, depending on the bank, and borrowers can access the money quickly. Like the PAL loans, these loans are much safer and more affordable than payday and car title loans and can save you hundreds of dollars.
• Use your tax refund.  If you think you might have a tax refund coming, file as soon as you can. The IRS says it usually issues refunds in 21 days or less if you file electronically. Ask the IRS to direct deposit your refund into your bank account.
• Get help managing debt.  A credit counselor may be able to help you manage your debt . Non-profit groups in every state offer credit guidance to people for no or low cost. Check with your employer, credit union, or housing authority for no- or low-cost credit counseling programs , too.
• Ask family and friends for help. It can be hard to borrow money from family or friends, but it can be worth it to avoid taking out or rolling over a payday or title loan. And even if friends and family can't loan you the whole amount, every dollar they can lend is a dollar you don't have to pay high interest rates on.
• Contact local charities and churches. Charities, churches, and other centers of worship often offer financial and other help at no cost to community members who are hitting a rough spot. It’s what they do, and they encourage people to ask for help.

Federal law treats payday and title loans like other types of credit: lenders must tell you the cost of the loan in writing before you sign the loan agreement. They must tell you the finance charge, which is a dollar amount, and the APR, which is a percentage. The APR is based on how much money you borrow, the monthly finance charge, the fees you’ll have to pay (like processing fees, document fees, and other charges), and how long you borrow the money. Use the APR to compare the cost of borrowing money from different lenders. It’s the clearest way to see how expensive a loan is.

Be sure to read the loan agreement carefully to see if there are other costs or fees. These can include late or returned check fees. There also may be fees to roll over the loan.

Also, check with your state attorney general or state regulator about payday and title lending laws in your state. A number of states protect people from high-cost payday lending with small-loan rate caps or other measures. Many states also require lenders to be licensed if they operate in the state.

If you’re in the military, the Military Lending Act protects you and your dependents. The law limits the APR on many types of credit, including payday loans, car title loans, personal loans, and credit cards, to 36%. The law also tells lenders to give you information about your rights and the cost of the loan.

The military also offers financial help and help managing your money. If you’re facing financial trouble, talk with a Personal Financial Manager (PFM) about your options. Do you need more time to pay your bills or a possible advance on your paycheck? Do you want to talk with a certified credit counselor about managing your money? Do you want some help from a military relief society? Call DoD’s  Military OneSource help line at 1-800-342-9647 to discuss alternatives. Visit MilitaryConsumer.gov to learn more.

If you think a payday or car title lender has been dishonest, contact your state attorney general or state consumer protection office . Tell the FTC too, at ReportFraud.ftc.gov . The FTC doesn’t resolve individual reports, but your report helps law enforcement detect patterns of wrongdoing and may lead to an investigation.

The 7 Best AI Tools to Help Solve Math Problems

How do you make seven even? Use these tools to solve the big math problems in life.

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The test questions, wolframalpha, microsoft mathsolver.

While OpenAI's ChatGPT is one of the most widely known AI tools, there are numerous other platforms that students can use to improve their math skills.

I tested seven AI tools on two common math problems so you know what to expect from each platform and how to use each of them.

I used two math problems to test each tool and standardize the inputs.

• Solve for b: (2 / (b - 3)) - (6 / (2b + 1)) = 4
• Simplify the expression: (4 / 12) + (9 / 8) x (15 / 3) - (26 / 10)

These two problems give each AI tool a chance to show reasoning, problem-solving, accuracy, and how it can guide a learner through the process.

Thetawise provides more than simple answers; you can also opt to have the AI model tutor you by sharing a detailed step-by-step breakdown of the solution. Using the platform is fairly straightforward, given that all you need to do is navigate to the platform and key in the math problem at hand. Alternatively, you can even upload a photo of the math problem onto the platform, and the AI will analyze the image and provide you with an answer.

The AI platform gave us a step-by-step breakdown of the problem:

It resulted in the answer:

While the answer is correct, the tool also provides further options for students to generate a more detailed breakdown of the steps or ask more specific questions.

WolframAlpha is an AI tool capable of solving advanced arithmetic, calculus, and algebra equations. While WolframAlpha's free version provides you with a direct answer, the paid version of the tool generates step-by-step solutions. If you want to make the best use of WolframAlpha's capabilities, you can sign up for the Pro version, which costs $5 per month for the annual plan if you're a student.

As expected, Wolfram Alpha solved both problems, showcasing its ability to handle different problems and provide precise answers quickly.

Julius works pretty similarly to the other AI tools on this list. That said, the highlight of this platform is that it has a built-in community forum, which users can use to discuss their prompts, results, or even issues they might be facing with the platform. Its active user base helps you quickly exchange ideas and receive feedback or advice. The platform's default version uses a combination of GPT-4 and Calude-3, based on whichever model best suits the prompt you input.

We tested the platform's accuracy by submitting the same problems that we did with the other AI tools. When submitting your prompt, you have the option of typing your question or uploading an image or a Google Sheet.

Julius provided correct solutions and offered options to help users verify the solution.

One of the oldest AI platforms, Microsoft's MathSolver is a great option if you want a tool capable of providing free step-by-step solutions to calculus, algebra, and other math problems. Here's how it fared when we submitted our math problems.

Microsoft's MathSolver provided the correct answers, and you can view the steps to the solution, take a quiz, solve similar problems, and more. This can be a great way to practice and perfect your understanding of different concepts.

Symbolab allows you to practice your math skills via quizzes, track your progress, and provide solutions to mathematical problems of different types, including calculus, fractions, trigonometry, and more. You can also use the Digital Notebook feature to keep track of any math problems you solve and share them with your friends. Another highlight of this platform is that educators can use the tool to create a virtual classroom, generate assessments, and share feedback, among other things.

The platform not only displays the answer but also lets you view a breakdown of the steps involved in solving the problem. You can also share the answers and steps via email or social media or print them for reference.

Anthropic launched its Claude 3 AI models in March 2024. Anthropic stated that Claude Opus, the most advanced Claude 3 model, outperforms comparable AI tools on most benchmarks for AI systems, including basic mathematics, undergraduate-level expert knowledge, and graduate-level expert reasoning. To test the platform's accuracy and ease of use, we submitted our two math problems. Here's how the platform performed:

While Claude initially got the answer wrong, probing it and requesting further clarification led to a correct solution.

Remember that we used the free version of Claude to solve this problem; subscribing to Opus (its more advanced model) is recommended if you want to take advantage of Claude's more advanced problem-solving capabilities.

Given that Claude got the previous problem wrong, our second, more basic fraction-based problem will indicate if the AI's performance was an anomaly or part of a consistent pattern.

As you can see, Claude correctly solved this problem and provided a detailed step-by-step breakdown of how it arrived at the answer.

GPT-4 can solve problems with far greater accuracy than its predecessor, GPT-3.5. If you're using the free version of ChatGPT, you'll likely only have access to GPT 3.5 and GPT-4o . However, for $20 per month, you can subscribe to the Plus model, which gives you access to GPT-4 and allows you to input five times the number of messages per day compared to the free version. That said, let's check how it performs with math problems.

In both cases, GPT-4o provided the correct answer with a detailed breakdown of the steps. While the platform is free, unlike other models, it does not have a quiz feature or a community forum.

These AI tools offer unique features and capabilities that make them a good option for math problems. Ultimately, the best way to pick a tool is by testing different models to determine which platform best fits your preferences and learning needs.

• User account access
• Add or remove accounts
• Change your account picture
• Change from a local account to a Microsoft account
• Troubleshoot sign in issues
• Error: We can't sign in to your account
• Sign-in options and account protection
• Change or reset a password
• Create a password reset disk
• Reset a local account password
• Lock Windows automatically
• Configure Windows Hello
• Go passwordless with your Microsoft account
• Enhanced Sign-in Security
• Change or reset your PIN
• Troubleshoot Windows Hello
• Save passkeys
• Use passkeys
• Manage passkeys
• Frequently Asked Questions (FAQ)

Troubleshoot problems with Windows Hello

Windows Hello is a fast, secure, way to sign in to your Microsoft Windows device, and facial recognition makes it even easier. An important part of making it secure is that facial recognition needs to be confident that the face it's seeing in the camera is a live person and not a photograph or other image.

In order to do that facial recognition needs to have a clear view of your face. In some unusual circumstances the conditions may be such that it still can't be sure. If facial recognition is struggling to recognize you try the following tips.

Check your lighting. If there is harsh or particularly bright light coming from one side or the other, it may have a harder time recognizing you.

Some unusual kinds of make-up are visible to infrared and that can make it more difficult for facial recognition to recognize you.

Try removing any hats or other accessories from around your face. Glasses normally aren't a problem, especially if you were wearing them when you first set up facial recognition, but some types of hats or other accessories that frame your face could be.

If you've already checked these things and you still aren't being reliably recognized, then you might have a hardware problem with your computer's camera. Contact the manufacturer for advice, and possible repair.

If your computer is managed by your work or school your IT administrator may have turned on enhanced anti-spoofing for Windows Hello. This sets an even higher standard for recognition and may especially cause problems in darkened rooms.

Windows Hello doesn't recognize me, or I get an error message when I try to sign in

If your face or fingerprint didn’t scan properly, or if you’re using the wrong finger to sign in, you’ll get an error message when you try to sign in through Windows Hello. If that happens, sign in with a PIN or password instead, and then set up Windows Hello again.

If you get an error message that says  Couldn't recognize you. Please sign in with your PIN.  when you try to sign in with Windows Hello, follow the steps below to improve recognition. This error message can occur if you wear glasses and didn't set up face recognition to recognize you both with and without your glasses. This might also occur if the device has been moved and the lighting conditions are dramatically different in the new location.

To improve recognition, select Start  > Settings  > Accounts  > Sign-in options  > Facial recognition (Windows Hello) , and then select Improve recognition .

If you are having a problem with Windows Hello facial recognition, try running a troubleshooter that might fix the problem.

Run Windows Hello troubleshooter

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