Debt Consolidation After Divorce: Starting Financially Fresh

Going through a divorce can be really hard emotionally and for your money. Often, costs are doubled, but income is cut in half. This leads to more debt. This debt can feel like a heavy weight holding you back from moving on after the divorce.

One of the biggest money challenges after divorce is having debt under both people’s names. Debt payments can add up fast. High-rate credit card debt is common as people use cards for costs. Personal loans taken out together during the marriage may still need payment from each person.

Another critical challenge is debt from legal issues and lawyer bills for the divorce. Lawyer bills add up fast, especially when cases drag on for months. This legal debt is on top of existing credit cards and loans for many. Without money help from an ex-spouse, legal debt can feel crushing.

What is Debt Consolidation?

Debt consolidation means combining many debts into one new loan. This results in just one payment instead of many.

Why Combine Debts?

There are a few key reasons to combine debts:

  • Lower monthly payments: Combining small debts into a larger one means smaller minimum payments. This helps free up cash each month.
  • Simpler payments: Keeping track of many separate debts and payments is hard. Consolidating makes it easier with one payment.
  • Pay off debt faster: Lower rates save interest, allowing more money to pay off the principal balance.

Different Ways to Consolidate

There are a few main options to consolidate debt. Let us compare debt consolidation loans.

These loans mean provide fixed rates and terms, like 5-year loans. These loans give clear payoff timelines. But they require good credit for approval.

Balance Transfers

Balance transfers move balances from high-rate credit cards onto one new card with a low intro rate. This consolidates payments. But intro periods are short, often 12-18 months. After that, rates can jump up again.

Debt Management Plans

Debt management merges unsecured debts through a credit counselling agency. The agency negotiates with creditors for lower rates and monthly payments. But these plans impact credit scores.

How to Compare Different Debts?

When weighing consolidation, compare debt consolidation loans by:

  • Interest rate – Higher rates are best to pay off first.
  • Remaining balance – Focus on higher balances before lower ones.
  • Monthly payment – Consider the payment savings from consolidating debts.
  • Payoff timeline – Consolidation extends repayment, so review new timelines.
  • Fees – Factor in fees for transfers, loans, or debt management plans.

But do your homework to pick the right debt relief option for your situation.

Finding the Right Debt Consolidation Plan

Combining everything into one new loan can provide relief if you’re carrying debt after a divorce. But how do you pick the best one? Here are some tips:

Assess your credit score

Your credit score impacts what consolidation options are available. Excellent credit (720+) gives you the most choices. Good credit (680-719) still offers options like loans. Fair credit (620-679) limits options to balance transfers or debt management. Know your credit situation.

Compare interest rates

Interest rates vary widely by option. Debt consolidation loans may offer 5-12% rates depending on your credit. Balance transfer cards can be 0% for a short period. Debt management plans negotiate lower credit card rates, like 5-8%. Choose the lowest rate possible to save money.

Evaluate fees

All debt consolidation options have fees. Balance transfer cards charge a transfer fee, usually 3-5% of the total moved. Debt management plans charge enrollment and monthly fees. Even loans can charge origination fees. Be aware of all fees – they add to your overall costs.

Consider the monthly payment

Consolidation aims to provide payment relief each month. Compare what the monthly payment would be for each option based on the interest rate, fees, and balance transferred.

Review the payoff timeline

Consolidation stretches out debt repayment in most cases. Compare how long each option will take to pay off debt completely. Shorter timelines are typically better to save on interest. But make sure the consolidated payment still fits your budget.

Pick the option providing maximum savings, smallest payment, and shortest payoff term that works.

Moving Forward Financially

Being on top of your debt is extremely crucial!  Once you have combined all your debts into one payment. Here are some tips that can help:

  • Be very careful to pay your new consolidated loan payment and other bills completely by the due date every month. This will help protect your credit score over time.
  • Try to save a little bit of each paycheck, even a small amount. Over time, small savings can add up into a fund for emergencies and future goals.
  • If you can, look for ways to increase your income through getting a promotion, doing freelance work, taking a part-time job, or other approaches.
  • Limit expenses on things you do not really need, like going out to restaurants, leisure shopping, and cable upgrades. These fun costs can take away from more important money aims.
  • Check in on your progress with debt repayment and savings each month and year. Celebrate success to stay motivated. Make changes to your plan if required.

Keeping a Positive View

Divorce and money struggles can be very discouraging at first. But try to focus on the future with hope.

  • Be proud of each debt payment you make and the dollar you save as progress. Small steps lead to success eventually.
  • Stay positive and patient on the journey instead of looking for quick fixes. Steady effort over time pays off.

Remember, this situation is only temporary. It will improve over time if you stay dedicated. Stay determined to reach your financial aims.


In addition to accumulated debt, savings often drop after a divorce. Nest eggs, retirement accounts and investments may be split or used on legal costs.

To overcome these challenges, combining all debts into one loan can help. Deb consolidation loans, balance transfers to a new card, or debt management plans can do this.

Refinancing debt pushes out payoff timelines. Consolidation alone won’t erase balances without budgeting. However, it requires a commitment to make monthly consolidated payments on time. With discipline, consolidating debt can be among many strategies for reducing debt after a divorce.

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