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Depending on your circumstances, debt consolidation may or may not be right for you. For every benefit of borrowing to pay down your debts, there’s a drawback or caution to keep in mind.

 Here are a few scenarios when you might consider debt consolidation:

  • Your outstanding debt (excluding your mortgage) is less than 40% of your monthly income.
  • You have a high credit score and can qualify for good rates on a balance transfer card or debt consolidation loan.
  • Your income is high enough to meet your monthly debt repayments.
  • You have a strategy for staying out of debt in the future.


Here is an example of when debt consolidation is a good plan. Let’s say you have three open credit cards with interest rates ranging between 19% and 25%.  If you’re able to qualify for an unsecured personal loan with a lower interest rate than an 8% interest rate, then debt consolidation could be a good plan. You’re saving money on interest and can get out of debt quicker than if you continue paying on high-interest credit cards.