When all the bills begin to pile up and it seems as though all you are doing is paying the minimum monthly payments on everything and getting nowhere fast, it may be time for you to consider debt consolidation. Debt consolidation is the act of combining all of your debts together in order to have only one payment that is usually lower each month due to a lower overall interest rate instead of multiple payments each month on debts with various interest rates which can add up to be quite a bit.

Having the idea that you want to enact debt consolidation with all of your bills is a great one, but you need to know where to begin before you can put your idea into action. There are two basic types of debt consolidation and depending on your personal situation you may favor one over the other. The two main types of debt consolidation are:

– Secured: This is probably the preferred way to conduct debt consolidation because you will get the best interest rate possible. With secured debt consolidation you obtain a loan and have something to put up as collateral such as your home, your property, or your vehicles. Because the lender has something tangible to take from you should you default on your loan they are more likely to not only give you the loan, but also give you the loan with a lower interest rate than that of the credit card or other debts that you have accumulated. The end result is a lower monthly payment that can end up saving you hundreds in interest charges over the life of the loan.

– Unsecured: Not everyone has collateral to put up so it then may be necessary to conduct unsecured debt consolidation. With nothing to offer as collateral you are probably not going to have much luck with lending institutions but you may be able to use what probably got you into your debt mess in the first place; your credit cards. Think about it, that is exactly what a credit card is, an unsecured loan. The credit card companies are ‘lending’ you the money based on faith and your credit score alone. If you have enough room one for your cards to transfer other debt balances then you can achieve the same basic effect of the secured debt consolidation in that you will have one payment every month. Beware with this tactic though as the credit card you use to take all the transfers may have too high of an interest rate to make the method worth your while.

If neither of these options work for you can always consider employing the help of a debt consolidation company. Most of these types of companies will offer you a free consultation and they are usually pretty straight forward as to whether or not they can help you.

As a last resort there is always debt settlement and personal bankruptcy. These options though should be saved for when you have no other options at all as doing either will result in your credit scores suffering. If you can, the best solution is debt consolidation.

Author Bio: Learn the credit card debt secrets the credit card companies don’t want you to know.

Category: Finances
Keywords: debt consolidation, consolidate debt