What Is Consolidation Without a Loan?

The term "debt consolidation" is frequently used to refer to debt consolidation loans, but that doesn't mean that the only way to consolidate your debt is through a loan. There are, in fact, several ways to consolidate your debt without a loan, each of which suits different needs and circumstances.

Balance Transfers

One way to consolidate your debt without a loan is to use balance transfers to transfer all your debt to one credit card. For example, if you have a lower-interest credit card already to which you can transfer other, higher-interest balances (because you have an adequate spending limit), a balance transfer is an easy way to consolidate your debt to one monthly payment. As an added bonus, using a balance transfer to consolidate your debt only takes a few minutes.

Introductory Offers

If you do not currently have a credit card with a favorable interest rate, you need a higher spending limit, or a combination of the two, you could open a new credit card with a special introductory rate. Introductory offers on new credit cards can be as low as 0 percent and can last for 12 months, or even longer. This method of debt consolidation is also very fast and can provide you repayment terms that are extremely flexible. However, you should be prepared to pay off your debt before the introductory period expires and a new, typically much higher, interest rate goes into effect.

Debt Management Plans

Alternatively, you could sign up for a debt management plan. Debt management plans (or DMPs) are not loans or credit counseling. Instead, with a DMP you deposit a set sum with the debt management company each month. From this fund, the debt management company distributes payments to your creditors, in exchange for a small management fee. Further, in addition to administering your account, the debt management company works with your creditors to reduce your interest rates and waive certain fees.

Bankruptcy

If your debts have become unmanageable, bankruptcy may be a good debt management option. Under a Chapter 13 bankruptcy, you can keep assets from secured debts, like your home, while discharging your unsecured debt, like credit card debts, so long as the debt is not exempt from discharge under the bankruptcy code. Moreover, your monthly payments are capped at a court-determined amount that leaves you with enough money left over for living expenses, making it a good option for some. But keep in mind that not everyone can qualify for a Chapter 13 bankruptcy; you have to meet certain income requirements. Moreover, filing for bankruptcy is highly detrimental to your credit score.