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How To Consolidate Your Debts in Ohio

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In a Nutshell

Continue reading to learn more about how debt consolidation works and the different options available to you.

Written by Attorney Alexander Hernandez
Updated July 10, 2023

Debt Consolidation in Ohio: What You Need To Know

Debt consolidation is the process of obtaining a new loan to pay off your debts. If you have good credit, you can get a debt consolidation loan to help you pay off credit card debt(s). You may also get a lower monthly payment, lower interest rate, and the convenience of a single monthly payment. A credit card balance transfer is a form of debt consolidation with credit card debt transferred to another credit card. This option will help get rid of higher interest credit cards, but confirm any transfer fees and what is the interest rate when the promotional period expires. If not, you may end up with a higher interest rate than you currently have, costing you more money. 

A refinance of your mortgage or a home equity loan will reduce the amount of equity your house has, but your monthly payments could be lower. It will also cost you more money in the long run. Equity is the difference between the amount you owe on the mortgage and the value of your house. By increasing the balance on your mortgage or home equity loan, a default places you at risk of losing your property with a foreclosure. Costs are also increased with loan origination fees. That’s why an unsecured debt consolidation loan offers the least risk. 

With a debt consolidation, you are paying back 100% of your debt. A debt settlement is different because you are only paying a portion of your original balance. Debt settlement is common when a creditor has filed a lawsuit against you. Debt settlements also differ from a debt consolidation because of possible tax consequences. For example, if you owe $1,000 and settle on $400, you may have to pay taxes on the $600 difference. It may also negatively impact your credit score.

Another form of debt consolidation is a debt management plan. With a debt management plan, you work with a nonprofit credit counseling agency that negotiates with creditors to come up with an affordable monthly payment plan. It is different from a traditional loan consolidation because you are not getting a new loan to pay off your credit card debt. You are only renegotiating your monthly payment plan.

Learn More Through Free Nonprofit Credit Counseling

Anyone can benefit from credit counseling because you learn about budgeting and taking steps towards being debt-free. You will work with a certified credit counselor who is trained in financial situations such as yours. A credit counselor will help create a debt management plan, consolidate your debt, and maybe even get a better interest rate. Your credit score may also improve. Credit counseling agencies also offer foreclosure and bankruptcy counseling. 

While credit counseling agencies help with your financial situation, they aren’t banks and cannot offer you loans. Check with the NFCC to confirm the agency you are working with is a nonprofit.

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How To Consolidate Your Debts in Ohio

Continue reading to learn more about how debt consolidation works and the different options available to you.

Collect the Details About Your Debts

Obtain your recent credit card statements and credit report to know the total amount of your debt. This is important to know if a debt consolidation is the correct option for you. Having your credit report also helps avoid missing any creditors. By law, you are entitled to a free credit report every year. Use it to check for any mistakes in your credit history.

Categorize your debt into secured and unsecured. Examples of secured debt are car loans and mortgage(s). Unsecured debt includes credit cards, personal loans, medical bills, and student loans. As you review your debts, focus on the interest rates and monthly payments. You will need this information when you plan your budget.

Determine Your Monthly Income

Next, calculate your income to know how much you can afford to pay back. Debt consolidation works best with consistent income. Debt consolidation may not be a good choice with commission-based jobs as it makes it difficult to determine how much you can afford each month. The same applies to unreliable sources of money such as child support and alimony.

Review paystubs that are most consistent with how much you typically earn. For example, if you included a paystub where you worked more overtime than usual, this would lead to a higher monthly payment plan. This places you at risk of falling behind with your payments. If you are paid bi-weekly, multiply your bi-weekly income times 26 and divide the answer by 12 since there are 26 pay periods in one year.

If your income includes Social Security, know that it is exempt in a bankruptcy case. Therefore, a debt consolidation may not be your best option. If your spouse or domestic partner is a co-signor on the debt, include their income as well.

Put Together Your Budget

Include all your bills in your budget. Separate expenses into those which are the same amount each month such as your rent/mortgage, car payment, and car insurance. Review at least the last 2 to 3 months of bank statements to find bills that fluctuate monthly like gas, groceries, and utility bills. Include occasional expenses such as car maintenance. If you own a home, you may pay your real estate taxes and insurance once a year. Average the per month costs of these bills by dividing the full amount by 12. If you don’t include these expenses, when they are due, you will not have enough money to pay for it and may end up getting into more debt because of it. Look for areas of overspending. Use the extra money to pay more than the minimum payments. The faster you pay down your debt, the faster your credit score increases.

After calculating your expenses, subtract that amount from your income to know how much money you have available to pay your debts. If there is too much money left over, review your income and expenses again for any mistakes. 

If you don’t have disposable income available or even a negative balance, then a debt consolidation plan isn’t a good option since you can’t afford to pay back your debts. Take advantage of online budgeting tools and apps such as Mint, Albert, spreadsheets like Excel, or your bank’s online budgeting program.

Do the Math

Now that you calculated your income and expenses, including the balance on your debt, it’s time to calculate your monthly payment plan. Get the total amount of your debt and divide that number by 60 to calculate a monthly payment plan of five years without interest. Depending on the amount of your disposable income and monthly debt total, then consider a debt consolidation or debt management plan.

Also, figure out your credit utilization ratio which is one of the ways your credit score is determined. A good credit utilization ratio is below 30% and could give you a stronger negotiating position with a lender. To figure out your credit utilization ratio, divide the total amount of debt by your credit limit. 

Review Your Ohio Debt Consolidation Options

Review the different loan options that include a credit card balance transfer, personal loans, unsecured debt consolidation loans, and home equity loans. 

With good credit, consider a balance transfer to other credit cards, but remember to read the fine print for any transfer fees or origination fee if it is with your home mortgage. Also, focus on the interest rate after the promotional period ends to avoid higher debt payments.

If refinancing your mortgage, while you may have a lower monthly payment, long-term you will be paying more. If your bank offered you a home equity loan with an Adjustable Rate Mortgage (ARM), note that the interest rate changes monthly. This could increase your monthly payment, making budgeting more difficult. If you need a lower monthly payment, ask the lender about mortgage modification programs that may lower your interest rate. Apply for a home equity loan with a lender you can trust such as your local bank. 

If you don't qualify for an Ohio debt consolidation loan, continue reading to learn about a debt management plan.

Why using your retirement account to consolidate and pay off your debt is a terrible idea

Withdrawing money from your retirement account will result in paying more in taxes. The closer you are to retirement, the more of a challenge this presents if less money is available. Since retirement accounts are protected from creditors and exempt in bankruptcy, a debt consolidation may not be the best choice.

In Ohio, paying off your car loan may also be a mistake. Bankruptcy exemptions include $4,000 per vehicle for a single filer. If you pay off your car with an Ohio debt consolidation loan, any equity over $4,000, the bankruptcy trustee could have you pay back. Those funds are then used by the trustee to pay back your creditors. 

Since student loans have flexible payment plans including income-based payment plans, exclude them from a debt consolidation loan.

Apply for an Ohio Debt Consolidation Loan

When applying for an Ohio debt consolidation loan, avoid lenders with aggressive sales tactics, mail offers from unknown lenders and lenders that require money upfront. If it sounds too good to be true, it probably is. Protect yourself and research with organizations you can trust like the BBB (Better Business Bureau) and the Ohio State Attorney General.

How to Stay Current with Payments After Consolidating Your Debts in Ohio

Timing is everything. Avoid your due date during the same pay period as your mortgage or rent so you aren’t left without money until your next paycheck. Have your monthly payments withdrawn from your bank account to avoid spending money unnecessarily on late payments and late fees. Track your spending habits and start an emergency fund. Use some of the financial budgeting apps and programs mentioned above to afford more than the minimum payment.

Ohio Debt Management Plan

A debt management plan is a form of debt consolidation and should be considered if you have been denied a credit card balance transfer or Ohio debt consolidation loan. With a debt management plan, you will work with a certified credit counselor to budget your credit card debt and consolidate it into a single payment with a payment plan that is usually between 48 to 60 months. Credit counseling agencies provide free counseling but may charge fees depending on the services you agree to.

A debt management plan is different from a traditional debt consolidation loan because the terms of the debt repayment is being negotiated without obtaining new or additional debt. With a debt settlement, you are settling your debt for a lesser amount than originally owed.

Ohio Debt Settlement

If you are facing lawsuits or have bad credit, you may need to consider an Ohio debt settlement. While debt settlement companies aren’t required to negotiate a debt settlement, try reaching an agreement where you only pay back a portion of the total debt. This works well with lump-sum payments. Remember, there are tax consequences for the portion of the debt that was forgiven. Also, research the debt settlement company with the links provided previously.

Ohio Bankruptcy

If an Ohio debt consolidation loan, debt management plan, or debt settlement does not result in the debt relief you seek, then consider filing for bankruptcy. Upsolve has helped thousands of people like you file bankruptcy for free. Our website is also free with hundreds of articles on bankruptcy and related subjects for every state including Ohio. Even if you don’t qualify for our free bankruptcy program or prefer speaking with an attorney, we will provide you with a referral.

Written By:

Attorney Alexander Hernandez


Since graduating from Nova Southeastern School of Law in 1999, Alexander Hernandez has focused a majority of his law practice on bankruptcy law. He was a founding partner of the South Florida Bankruptcy Center which focused exclusively on Chapter 7 and Chapter 13 bankruptcies. Al... read more about Attorney Alexander Hernandez

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