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What Debt Can You Consolidate – Understanding Your Debt Consolidation Options

by Jesse Campbell on
4/16/2025
in Repaying Debt
Young couple reviewing financial paperwork together.

If juggling multiple bills is leaving you overwhelmed and unsure of where to start, debt consolidation might offer a way forward. By combining several debts into a single monthly payment – often with a lower interest rate – you can simplify repayment and potentially save money in the process.

But not all debt is created equal, and not every type can (or should) be consolidated the same way. Here’s what you need to know about the types of debt consolidation, your repayment options, and how to determine what’s right for you.

Which types of debt can be consolidated?

The good news is that most unsecured debt can be consolidated. That includes:

  • Credit card debt: This is the most common target for consolidation. If you’re carrying balances across multiple cards, you might consolidate them with a balance transfer credit card (with a 0% intro APR), a personal loan, or a debt management plan (DMP) through a nonprofit credit counseling agency like MMI. Read more about credit card consolidation.
  • Medical debt: Medical bills can be consolidated in many of the same ways as credit card debt, especially if they’re in collections or held by lender or financing company. A DMP or personal loan may be an option.
  • Personal loans: If you’ve taken out multiple unsecured personal loans – especially high-interest ones – you can often consolidate them into a new loan with better terms.
  • Student loans: Federal student loans can be rolled into a Direct Consolidation Loan from the U.S. Department of Education. Private student loans can’t be consolidated with federal loans but may be refinanced with a private lender. Read more about student loan consolidation.

What types of debt can’t be consolidated?

Some debts are more difficult, or impossible, to consolidate using traditional methods: mortgages and auto loans (unless refinanced separately); tax debt (though the IRS may offer payment plans); and child support and legal judgments.

Trying to consolidate these types of debt often requires more specialized solutions.

Debt consolidation options: what’s right for you?

There are several tools available to consolidate debt. The best choice depends on the types of debt you have, your credit score, and your overall financial picture.

Balance transfer credit cards

  • Best for: people with good credit and short-term payoff goals
  • Pros: 0% APR for introductory period
  • Cons: fees, high APR after promo ends, credit score requirements

Debt consolidation loans

  • Best for: people with fair to good credit and a steady income
  • Pros: fixed interest rate, predictable payments
  • Cons: may come with fees or a longer repayment timeline

Home equity loans / HELOCS

  • Best for: Homeowners with equity
  • Pros: Potentially low interest rates
  • Cons: Risk of foreclosure if you default

Debt Management Plans (DMPs)

  • Best for: Those with high-interest credit card or medical debt
  • Pros: No loan required, no credit score needed to qualify, interest rates often reduced
  • Cons: Accounts may be closed, full repayment required

Learn more about DMPs and how they work.

Student loan consolidation

  • Best for: Simplifying multiple federal loans or accessing new repayment plans
  • Pros: One payment, potential eligibility for income-driven plans
  • Cons: Can extend loan term and increase total interest; federal perks may be lost if you refinance privately

Can you combine all your debts into one?

While it might sound appealing to wrap your credit cards, medical bills, and student loans into a single monthly payment, it’s not always realistic. Some debts can be combined (like credit cards and medical debt), while others (like federal student loans) usually require separate consolidation solutions.

If you’re considering using a home equity loan or cash-out refinance to consolidate all your debts – including unsecured ones – proceed with caution. You’d be turning unsecured debt into secured debt, which means your home could be at risk if you fall behind.

Key things to consider before consolidating debts

Before choosing a consolidation method, ask yourself:

  • Will I save money on interest overall?
  • Can I afford the new monthly payment?
  • What fees or risks are involved?
  • How’s my credit score, and what options does it open or close for me?

Debt consolidation is a great option if you:

  • Have high-interest unsecured debt
  • Are able to make consistent payments
  • Want a simplified repayment structure
  • Have a good credit score (or partner with a nonprofit) to access better terms

It may not be the best route if:

  • You’re already behind on payments
  • You’re experiencing long-term income loss
  • Your credit is severely damaged, and you need more drastic relief

In those cases, options like debt resolution might be more appropriate.

Let’s find your way out of debt, together. Begin your free debt counseling session today and take the first step toward a more manageable future.

Tagged in Debt consolidation, Debt strategies

Jesse Campbell photo.

Jesse Campbell is the Content Manager at MMI, with over ten years of experience creating valuable educational materials that help families through everyday and extraordinary financial challenges.

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