In this Money Minute episode, financial expert Robert Palmer answers a listener’s questions of- “what is the best way to consolidate debt?

“This is a tough one, because most debt consolidation can actually hurt your credit. If you go through consumer counseling where they negotiate down, that actually will wreck your credit. It can be, in some cases, worse than a bankruptcy.

One of the best ways to consolidate your debt, if you have it, is to use your home equity. If you own a house and have home equity in it, you can do a cash out refinance and pay off your debt that way. Otherwise, the problem is if you’re credit cards are all maxed out that means your credit score is low. So, no one is going to give you a really good rate on a new piece of credit because you’re credit score is already wrecked. The best time to get credit is when you don’t need it. That’s what is tough for people.

There are some great zero interest credit cards out there you can use to combine a couple of balances and pay them off quicker. That is something I recommend people do. But, you have to have a pretty good credit score to get the zero interest card. So, if everything you have is maxed out, it is this big catch 22. The best course of action is to start paying those down. Making the payments, and paying the highest interest rate credit card  off first so that you can save as much money on interest every month.”

Don’t forget to tweet your questions for Robert Palmer to @RadioRose using #MoneyMinute.

Learn more about whether consolidating your debt is the right decision here: