Can’t afford to consolidate your debt this August? 5 alternatives to consider

Debt consolidation can be a tempting solution when it feels like your credit card bills and loans are taking over your financial life. After all, consolidating debts into one manageable payment can cut down on interest charges and make it easier to pay back what’s owed. For some people, though, taking out a consolidation loan is still too much to handle financially. All it takes is a high interest rate, a lack of available credit or simply not being able to afford the loan fees for debt consolidation to be out of reach.

And that’s especially true right now, at a time when interest rates remain elevated and many are feeling the pinch of rising costs due to persistent inflation. These and the other economic pressures that are looming can make it tough to find room in the budget for a monthly debt consolidation loan payment on top of your other obligations. But if you find yourself unable to afford debt consolidation this August, the good news is that it’s not your only option for getting rid of debt. There are alternatives to help you better manage your debt and offer you a clear path toward financial freedom. 

So, what can you do if consolidating your debt is off the table? Below, we’ll look at ways to take control of your finances without breaking the bank.

Find out how to get started on a path to debt relief today.

5 debt consolidation alternatives to consider this August

If debt consolidation is unaffordable for you right now, there are practical alternatives that might be a better fit for your current financial situation:

Work with your creditors on a solution

If you’re struggling to meet your debt obligations, it’s worth contacting your creditors and explaining your situation. You may find that your creditors are willing to work with you, especially if they believe you’ll continue making regular payments. By taking this approach, you might be able to:

• Lower your interest rate
• Extend your repayment period
• Request a payment deferral

While negotiating with creditors can be time-consuming, it can significantly help reduce the burden of your monthly payments. Just be sure to get any agreements in writing and keep records of your communication with them to ensure you’re covered if a dispute arises.

Learn how the right debt relief company can help you now.

Try to settle your debts for less than you owe

Debt settlement, also known as debt forgiveness, is an option for those who are unable to afford their full debt repayment but want to avoid bankruptcy. With debt settlement, you typically work with a debt relief company to negotiate a lump-sum payment in return for reducing the total amount owed, which can save you hefty amounts of money.

Be cautious when exploring this route, though. Debt settlement can reduce your balance by an average of 30% to 50%, but it will usually require you to stop paying your creditors and accumulate savings in an escrow account to pay creditors instead. This can lead to credit score damage, but it can also lead to significant savings if managed properly.

Transfer your balances to wipe out interest charges

If you have a relatively good credit score but cannot afford consolidation through a loan, a balance transfer credit card might be a suitable alternative. Many credit card companies offer promotions where you can transfer your existing high-rate debt to a new card with a lower or 0% introductory APR for a set period (usually between 12 and 21 months).

This could give you the breathing room you need to pay down your debt without incurring more interest charges. However, it’s important to note that balance transfers often come with fees of between 3% and 5% on average, and the 0% interest rate is temporary. If you don’t pay off the balance before the introductory period ends, you’ll be hit with a high rate on any remaining balance. 

Consider a personal loan with a lower rate

If you’re unable to consolidate your debt through traditional methods, a personal loan with a lower interest rate than your credit cards could be another viable alternative, especially if you have a good credit score and can get a lower fixed interest rate. These loans can still be used to consolidate your debt, and they may offer more repayment flexibility. However, be mindful of the fees and do the math to determine whether the monthly payment is sustainable for your current financial situation.

Work with a credit counseling agency on debt management

If debt consolidation isn’t an option, a credit counseling agency can help you develop a debt management plan, where they negotiate with creditors on your behalf to lower interest rates and create a fixed monthly payment schedule. Credit counseling agencies typically charge a fee for these services, but the cost is often much lower than the alternatives. And, most agencies provide free educational resources and budgeting tools to help you avoid falling into debt again in the future.

The bottom line

If you can’t afford to consolidate your debt this August, there are several other strategies worth considering. From negotiating directly with creditors to exploring debt settlement or seeking help from credit counselors, the alternatives can still help you regain control of your finances — and they can do so without the upfront costs of debt consolidation. The best solution depends on your financial situation, though, so be sure to carefully evaluate your options thoroughly before making a decision.