Debt consolidation is a simple method to combine your balances from credit cards and other loans into one new loan. This new loan replaces your existing loans. After calculating your total debt balances, apply for a consolidation loan with your bank. The bank will evaluate your income and credit to see if you qualify, and the company might ask for a list of debts that you plan to payoff. Collateral, such as a car title, is also typical with consolidation loans. Acquire your loan, and then distribute funds from the loan to your various creditors to consolidate.

Consolidation after a divorce offers an effective means of getting back on your feet. Your former spouse may have paid your credit card bills, medical bills or auto loan. If these accounts are in your name only, you’re now responsible for the debt after divorce. The interest rate on loans impacts the monthly payment, and if you’re paying a high interest rate on credit cards, keeping up with minimum payments can prove challenging. By means of consolidation, you can likely obtain a lower interest rate and reduce your monthly payment altogether. In addition, since consolidation loans have a fixed term, you can be debt-free in a few years.

Several consolidation options can help get your personal finances on track after divorce. If you decide to refinance and keep your home after divorce, you can use money from the property’s equity to consolidate debts. If you’ve paid off your car, but need to pay off high-interest credit cards, you can apply for a debt consolidation loan and use your car as collateral. Another option includes applying for a new credit card and transferring your existing balances. For this method to work, the new credit card must have a lower rate than your present credit card accounts.

Keeping your name on accounts shared with your ex-spouse can create problems especially if your former spouse if the primary account holder. If he misses a payment or sends a payment late, this action can lower your credit score. Dissolve all joint accounts when divorcing. This includes removing your name as an authorized user on his credit card accounts. If the two of you have joint credit card accounts, pay off the debt and then close the account. If you share ownership of a car or house, selling the asset dissolves the joint obligation.