4 low-cost ways to consolidate debt while rates are high

We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms.

Thanks to high inflation and the rising costs of many goods and services, credit card usage has jumped recently. And while cards can make it easier to stay afloat during challenging financial times, they're also expensive.

In fact, according to the Federal Reserve, the average rate on credit cards is now over 21% — a number that can make even minimum payments out of reach for many.

Fortunately, there are low-cost ways to pay off those cards and get your debt under control .

Find out how easy it could be to get rid of your high-rate debt today .

4 low-cost ways to consolidate debt while rates are high

Here's how experts say you should consolidate your credit cards and combat today's higher rates.

Debt consolidation loan

Taking out a debt consolidation loan is one potential avenue to explore. With this, you take out a loan with a lower rate than your credit cards have, and then use the loan to pay off all your card balances.

"These allow you to combine multiple debts into a single payment," says Josh Richner, founder of FaithWorks Financial.

Though you can get consolidation loans from big banks and lenders, Richner says credit unions typically offer the lowest rates. "They're member-focused and can provide more favorable terms," he says.

Learn more about your best debt relief options now .

Debt management plan

Another option is a debt management plan. This is when you work with a debt relief company or credit counseling agency that works with creditors on your behalf. They may negotiate lower interest rates or get certain fees waived. You then make a single monthly payment to the company, and they gradually pay down your debt for you.

Richner calls DMPs "an excellent option" if you have multiple credit card balances you want to consolidate .

"The best way to pay as little as possible is to work with a debt professional who can get you on a debt management or debt settlement program," says Howard Dvorkin, chairman of Debt.com. "A debt management plan can cut your total debt payment by up to half by reducing or eliminating the interest rates."

Balance transfer cards

A balance transfer credit card is another strategy to explore. While it might sound strange to pay off one credit card with another, when done right, it can save you significantly on interest.

For example, if you can get a credit card with a 0% interest rate for a year, you can use it to pay off your existing credit card balances and then make interest-free payments for the next 12 months. This allows your money to go further and can help you pay off your debts more efficiently and affordably .

"If you have a great credit score you can often get up to 18 months with zero interest," Dvorkin says.

Just make sure you have a plan to pay off the balance — or transfer it to a new card before the promo rate expires.

"Why would credit card companies offer this if it wasn't making them money?" Dvorkin asks. "They know most people won't pay off their credit card debt during those months. Then, when the teaser rate is over, they jack up the interest rate, often higher than you were paying before."

Home equity

If you own a home, you may also be able to borrow from your home equity to more affordably pay off your credit card balances. There are three options: Home equity loans, home equity lines of credit (HELOCs), and cash-out refinances.

"Since these loans are secured by your home, they typically come with lower interest rates," Richner says, noting that cash-out refinances are usually the most affordable, with home equity loans after that.

Still, these loans are not without risk. If you fail to make payments, the lender could foreclose on your house. As Richner puts it, "It's crucial to consider the risk of losing your home."

The bottom line

If you want to make sure you get the best rates on whatever debt solution you decide on, it's important to have a good credit score before applying. Higher credit scores usually equate to lower interest rates and better terms, which will help minimize your costs when paying down debt.

You can also think about bringing in a co-signer with good credit, as this can help you qualify for lower rates, too.

Finally, shop around for your loan, debt relief company , or balance transfer card.

"Don't settle for the first offer you receive," Richner says. "And don't be afraid to negotiate terms with lenders. Some may be willing to lower interest rates or waive fees to secure your business."