Debt Consolidation Without a Loan

Debt consolidation loans are an attractive option for debt relief because they simplify repayment and could make it cheaper. They give you one payment instead of many, and sometimes lower your interest rate. 

However, consolidation loans don’t fit every situation. Getting a debt consolidation loan requires good credit, economic conditions leading to low rates, and the ability to make the monthly payments.

If all those things aren’t in place, that’s okay—there are ways to streamline and simplify repayment without getting a debt consolidation loan. Let’s look at options that might help you get debt relief without a loan or a balance transfer card.

Can You Do Debt Consolidation Without a Loan?

Yes. You can accomplish some of the same things in other ways.

Debt consolidation involves combining multiple debts into one by getting a new debt consolidation loan. The new loan might be a balance transfer credit card, personal loan, or home equity loan. If those tools aren’t available or the terms don’t work well, consider other options. The right approach to streamlining your debts depends on your income, financial goals, debt amounts, and individual circumstances.

For example, debt management plans and debt relief programs let you make one monthly payment instead of many. And DIY debt relief strategies may help if you just need more structure in your payoff plan.

Let’s start with basic strategies and then move to the bigger guns.

DIY Debt Payoff Strategies

DIY debt payoff can be a good option if you owe an amount you can reasonably pay back. Here are two popular methods.

Debt snowball method

The debt snowball method focuses on scoring quick debt pay-off wins to stay motivated. With this approach, you make minimum payments to all of your creditors. You make a larger payment to your creditor with the lowest balance. The idea is to get a win by eliminating that smallest debt relatively quickly. That gives you a sense of accomplishment so you can stay motivated.

When you pay off a debt, add the monthly amount you were paying toward it to the payment for the next-lowest balance. This method is good for motivation. It also builds power over time, as you combine more and more monthly payments from retired debts into one larger payment toward your remaining debt. 

Debt avalanche method

Your most expensive debt is the debt with the highest rate—and that may not be the smallest debt. If you’d like to pay less in total interest rather than focus on a quick win, the debt avalanche method may be a good fit. You aim extra payments at your debt with the highest interest rate first under this method. 

This way, you pay off your costliest debts first, even if it takes longer to get a win. Just like with the snowball method, once you pay off a debt, you roll that monthly payment onto the next debt you're working on (the one with the next-highest interest rate).

Since your highest-interest debt may not be your smallest debt, getting a win could take longer, making it harder to stay motivated. But getting that high-interest balance down to zero may bring plenty of satisfaction when you do get there.

Debt Management Plans

Debt management plans are offered through nonprofit credit counseling agencies. These agencies may offer a variety of money management services, including working with your creditors to negotiate a DMP. 

You repay all that you owe on a DMP. However, your counselor might negotiate a reduced interest rate or waived fees. You make one monthly payment through these plans, usually for three to five years. 

Unlike with debt consolidation, your accounts usually get closed as part of a DMP. This is good in that you can't get deeper into debt. However, a DMP usually lowers your credit score temporarily.

Debt Relief Programs

Debt relief programs could also simplify your repayment process, much as debt consolidation does, though they work differently from consolidation.

Debt relief programs help you negotiate debt settlement with your creditors, which means you pay less than the full amount you owe to settle the debt. While you could get a settlement on your own, professionals have experience with negotiations, and may even have working relationships with your creditors. 

When you work with Freedom Debt Relief, you get a free debt evaluation to find out if the program could work for you. If you enroll, you make monthly deposits into a dedicated debt repayment account you own and control. Experts negotiate with your creditors to settle your debt for less than you owe, and you sign off on any potential agreement.

Many clients resolve their first enrolled debt within a few months. You don't pay an upfront fee—you pay only after a deal is negotiated with your creditors and approved by you, and at least one payment to your creditor has been made.

With debt settlement, your credit score is likely to take a hit when the settled debts appear on your credit report. Also, if you miss regular debt payments while you’re saving money to offer creditors, you should expect significant credit score damage. However, settling could ultimately cost you less and take less time than chipping away at your debts with minimum payments. Once your finances are stable, you can work on building and maintaining good credit. 

If a creditor takes legal action against you for an enrolled debt, Freedom Debt Relief may engage a Legal Partner Network attorney to negotiate for you. This service is free for qualifying clients who have made their monthly deposits on time. The offer does not apply to legal action taken before you enrolled, or to legal action taken on debts that are not enrolled.

Freedom Debt Relief is not a Credit Repair Organization, and does not provide or offer services or advice to repair, modify, or improve your credit.

Bankruptcy

If these options don’t fit your circumstances, bankruptcy may be a good fit for managing debt. There are two possible approaches to bankruptcy.

• Chapter 7 bankruptcy is a “liquidation” bankruptcy. You might have to give up some of your assets (things you own). They are taken, sold, and the proceeds used to repay creditors. The rest of your debt is forgiven. Eligibility is based on financial need. Only people under certain income limits can file for Chapter 7. If you qualify and you have a lot of unsecured debt but few assets for a court to take, this could be a good option.

• Chapter 13 bankruptcy doesn't take your assets. You enter a three- to five-year repayment plan. Your remaining balances are forgiven after you complete the plan.

Filing for bankruptcy has upfront costs, including legal fees and court filing fees. Bankruptcy stays on your credit report for seven to 10 years, and impacts your credit score. However, the impact of the bankruptcy diminishes over time.

Consulting with an experienced bankruptcy attorney could help you decide if this option is best.

How to Choose the Right Debt Strategy Option for You

Choosing the right debt repayment strategy is important. It will affect your debt payoff efforts and your monthly budget.

You'll want to ask yourself a few key questions as you decide which strategy is right for you including:

• Are you current on payments or behind? DIY debt relief or debt consolidation tends to be best for those who are current on payments. Debt settlement could be a better option for those who are behind. 

• Can you afford regular monthly payments? A debt management plan and debt relief program both typically require regular monthly payments. So does Chapter 13 bankruptcy and debt consolidation. However, payments would likely be lower with debt relief programs or a bankruptcy repayment plan. 

• How much debt do you have? If the amount is very substantial—like $10,000 or more—then you may be better off trying to settle for less than you owe. Repaying the full balance can be too difficult. 

• Do you own assets you'd have to give up in bankruptcy? Chapter 7 is a good option only if you don't have a lot of assets to lose.

• Do you want to keep your payoff strategy private? Debt settlement allows you to resolve your debt without a public record. Bankruptcy does not. 

Ultimately, if you have steady and reliable income, debt management plans or DIY methods could work for you. If your debt balance is too large or you don't think you can afford to pay back every dollar, debt settlement or bankruptcy would be the way to go.

You can undergo a free debt evaluation with Freedom Debt Relief to see if debt settlement could work. Or, review how Freedom Debt Relief works to get insight into the process and see if it feels right for you.

Debt Consolidation Without a Loan: Next Steps

Now that you know the basic options for debt consolidation without a loan, your next steps might include:

• Reviewing your budget to see how much money you have to devote to debt payoff

• Noting how much debt you have, what the rates are, and whether paying it back is possible

• Comparing payoff options to find one that could work for you 

• Getting a free debt evaluation with Freedom Debt Relief