Debt has a way of piling up on you as the months and years pass. Even if you’re diligent with your spending, there’s a chance you could find yourself in more debt than you ever imagined possible.

Should you come face to face with this situation, it’s critical that you consider all your options. And for many people, this means taking a strong look at debt consolidation.

Debt consolidation is exactly what it sounds like. This is when you combine multiple types of debt into one balance.

For example, if you have three credit cards with a balance, you could use a balance transfer to consolidate the debt.

Or if you have credit card debt and a home equity loan, you could use a personal loan to bring it under the same roof.

While the premise is simple to understand, there are steps you must take to make debt consolidation work for you.

1. Calculate Your Debt

This means two things:

• Knowing the type of debt you have
• Knowing the amount of debt you have

Common types of debt include credit cards, personal loan, home equity loan, and loans from friends and family.

Check each account for a clear understanding of your current balance, monthly payment, and interest rate.

2. Consider Your Options

There’s more than one way to consolidate your debt. Some of your best options include:

• Balance transfer credit card
• Home equity loan
• Personal loan

If you only have credit card debt to consolidate, a balance transfer credit card is often the best approach. Not only can you consolidate your balances, but you can generally do so at a zero percent introductory rate.

Should you need to consolidate more than one type of debt, a home equity loan or personal loan are your best options.

3. Crunch the Numbers

Don’t do anything until you take a deep dive into the numbers associated with a consolidation.

Your goal is to determine if you’ll actually save money by consolidating your debt. You can then decide if the process of consolidating is worth what you’ll get in return.

Note: if you don’t gather accurate numbers in the first step above, you’ll end up with a miscalculation here.

Final Thoughts

If you have any reason to believe that debt consolidation could improve your finances, now’s the time to learn more.

Take the three steps above to better understand your situation and how to proceed. Once you consolidate your debt, you may look back and wonder why you waited so long to take action.