How to manage $35,000 in debt—and whether a loan could help

When you’re ready to plan your path out of debt, it’s a great idea to think about ways to relieve your budget, lower the cost of your debt, and manage your money more efficiently. You're in charge and it's up to you to decide how to move forward. 

Let's look at how a debt consolidation loan could help you get ahead, and what alternatives you might consider. 

What makes $35,000 in debt hard to manage?

A $35,000 debt load can make your financial life harder for several reasons. 

• You might need to make high monthly payments to stay current, which leaves you with less money to cover necessary expenses or save. 

• Too many debt accounts can be hard to keep track of, and you could end up with late fees if you accidentally miss a due date. 

• High interest rates could make it harder to make a dent in the balance, especially if you only make minimum payments. 

• Debt can trigger financial stress, which can affect your mental, emotional, and physical health.

Sometimes life happens and makes debt harder to handle. You lose your job, for example, or you get hurt and can't work. If your money needs to go to rent or groceries, debt could get pushed to the backburner. 

You've tried all the little tweaks and hacks that the finance experts recommend but seem to go nowhere. What you really need is a strategy to repay debt that's realistic for your situation. 

Could a debt consolidation loan still work?

Plenty of people use debt consolidation loans to get credit cards and other debts under control. The details of your situation can determine if it's a solution for you. 

Consolidation loans let you borrow money to pay off other debts. You could replace multiple payments with just one.

A consolidation loan could be a good fit if you:

• Are current on your debt payments

• Have good credit and steady income

• Can qualify for a loan with an interest rate that’s lower than the rate you currently pay

You also need to be able to afford the monthly payment for a debt consolidation loan. 

For example, a $35,000 personal loan at 17% with a five-year repayment term works out to $875 per month. If that's less than you pay now to all your debts each month, consolidation could bring some relief to your monthly budget. 

When a loan isn't the answer—what is? 

What if debt consolidation isn't what you need? Another path could be a better fit. Here are some alternatives to debt consolidation loans you might consider. 

Debt management plan (DMP)

A debt management plan allows you to make one monthly payment to a credit counselor, who distributes the payment to your creditors. You might pay a lower interest rate, but your monthly payment could be higher than it is now because the payoff goal is three to five years. A DMP doesn't reduce the balance you have to repay. There’s a temporary negative impact on your credit standing if you close credit card accounts that still have a balance to pay off.

Debt relief

Debt negotiation or debt relief could significantly reduce what you owe. Your creditor accepts a smaller amount, and the rest of the balance is forgiven. You could get rid of debt faster than by making minimum payments. The debt relief process has a negative effect on your credit standing. Creditors don't have to agree to negotiate. 

Hardship program

Debt hardship programs offer temporary relief if you can't make your payments. You might get a lower payment or interest rate, but it's typically only a short-term solution. Hardship programs could hurt your credit standing if your creditor closes your account or lowers your credit limit while you get back on your financial feet.

Bankruptcy

Bankruptcy offers legal protection from creditors while you regroup. Chapter 7 lets you erase certain debts, while Chapter 13 gives you time to pay them off. Bankruptcy gets a bad reputation because of the damage it does to your credit but for some people, it's truly the best way to handle their debt situation. 

Regardless of which one you choose, there's no shame in any of these options. They're all legal ways to manage debt and learning more about them is a good thing, since it means you're ready to take action. How to decide what's right for you

Should you get a $35,000 debt consolidation loan? Some self-reflection could help you find the answer. 

Here are a few helpful questions to ask yourself to decide if you should consider a consolidation loan or another method to manage debt. 

• Are you current on debt payments? If you are, how long do you think you'll be able to keep up the pace?

• If you're behind on payments, do you think it’s possible to get caught up?

• Could you afford $700 to $900 a month for consolidation loan payments?

• What rates do you think you'd qualify for with a consolidation loan? Have you asked a lender to prequalify you (without a hard credit check)?

• Do you own a home and if so, would you consider a home equity loan or line of credit (HELOC) to pay off debt? 

• Do you have any assets that you wouldn't want to lose, like bank account balances or a car?

• What's your ideal timeline to get rid of debt?

• How worried are you about credit score impacts from debt? 

Some debt relief options might feel more comfortable to you than others. For example, some people only want to consider solutions that involve paying back every penny. We get it, and that’s a clear advantage of debt consolidation loans.

What you have to ask yourself is how important debt freedom is to you. If there's a solution that could help you put debt behind you sooner, rather than later, it makes sense to take advantage of it. Once the debt is gone, you can work on rebuilding a stronger financial foundation. 

What's next

• Inventory your debts. Write down the amount owed to each one, your monthly payments, the interest rates, and your due dates. 

• Prequalify for a $35,000 debt consolidation loan online. Look for a lender that lets you check rates without a hard credit pull. 

• Consider a chat with a nonprofit credit counselor or a qualified debt specialist to discuss your options. 

• Take one step forward to manage your debt, even if it's something small. Then take another and another, until you reach your goal.