One of the key factors of healthy financial habits is to keep track of your debts and to repay them in full and on time. Doing this impacts your credit score and determines whether lenders will perceive you as a reliable borrower, and find you eligible for greater loans for different purposes, and for issuing credit cards. However, even after being cautious with how we spend and save, there may be occasions, such as a medical emergency or other pressing financial circumstance, when we’re compelled to either max out our credit card, or we take on additional loans, and from multiple lenders. And in case we’re unable to repay our debts in full, our credit score is likely to get dented. Debt Consolidation is the Solution While owing debt to multiple lenders is not really a recommended nor easy situation, one solution for this is to consolidate all your debts. Essentially, this would mean that you take one loan to repay all of the debts that you owe, and then focus on repaying this one loan. 4 Smart Ways to Consolidate Debt Repay your consolidation loan on time: The idea behind taking a debt consolidation loan should not be to default on that too. Such a loan will help you be back on the track to financial stability. Cut down any unnecessary expenses, begin to save more, try to go up from paying the bare minimum due each month to the full amount due each month. This way, your interest won’t rise, and it will be easier for you to clear out your debts. Dip into your emergency savings: Your emergency fund can be put to prudent use when you’re stuck in a financial rut. Whether Public Provident Fund, National Savings Certificate, bonds and securities – either of these could help you in your debt consolidation plan without seriously impacting your credit score. Don’t close old accounts: Just because you took a debt consolidation loan does not mean that once you’ve cleared your debt, you need to close off your earlier accounts or your credit card account. This can adversely impact your credit score because you had worked towards building credit with your earlier account. Closing that would mean you’ll have to start over, and that’s not always an easy place to be in. Reframe your entire budget: A financial introspection may be effective in such cases, where you redraw your expenses and create a budget that’s practical and will help you see through your time of debt.