Eight ways of the best ways .. Free,Next to winning the lottery, a debt consolidation loan is a debtor's dream. With one monthly payment and a fixed monthly payment schedule, you can actually see an end to those monthly payments.


In reality, consolidating bills isn't always easy. If you have a lot of debt, it can be hard to find a consolidation loan at a lower interest rate. And if you're not careful, you can end up deeper in debt than when you started.

Your goal in consolidating your debt should be to lower your overall costs. To accomplish this there are two things to keep in mind:

1. Get the lowest interest rate possible

2. Have a plan to pay off your debts in 3 - 5 years.

Here are some of the best ways to consolidate:

Using Credit Cards

The good news about this method is that with a good credit rating, you may get a much lower rate than other forms of consolidation loans. And since credit card issuers don't require collateral, you aren't "risking the farm."

Call your current issuer to ask what interest rates they will offer you if you transfer balances from other cards over to theirs. Go for a fixed rate if you can get it, and ask them to waive any transfer fees. If you can't negotiate a low rate with your current issuer, try shopping for a new card at a site such as CardRatings.com. But be careful! Too many applications for credit in a short period of time can hurt your credit rating.

Once you do consolidate this way, be sure to set up an optimal payment plan so you can be debt-free in 3 - 5 years.

Home Equity Loans

With a home equity loan, you borrow against the value of you home, minus any other mortgages. The two major kinds are:

1. A Home Equity Loan - a fixed amount of money for a fixed period of time (sometimes at a fixed rate) and

2. A "Home Equity Line of Credit" where you borrow up to a pre-approved credit limit (interest rates usually variable) and can borrow again if you still have money available.

These loans can offer attractive rates, low payments, and the interest is usually tax-deductible if you itemize.

Many issuers offer no or low closing costs for these loans. Interest rates are often variable, however, and there's always the risk that you can lose your home if you can't pay.

Cash Out Refinance

Refinancing your home and taking out money to pay off bills (called "cash-out refinance") is yet another way to tap the equity in your home. If you can refinance at a substantially lower interest rate, you'll eliminate the high interest costs of the debts you pay off, and you could even come out with a lower payment than you have right now since rates are so low.

One option to consider: an interest-only loan. By lowering your monthly payment, you can free up money to use toward paying down other high-rate debt or building a retirement fund.

Make sure you understand the total cost of refinancing. Take any money you've freed up by paying off other bills and use that to create an emergency savings fund.

Traditional Debt Consolidation Loans

A debt consolidation loan is an unsecured personal loan, and the only collateral you are offering for the lender's security is you. Because lenders consider them risky loans, they're usually more expensive and not always easy to get if you have a lot of debt.

If the interest rate is too high to make it worth it and the repayment term is ten or fifteen years, you should probably consider another method of consolidation. However, if the term and interest rate are right, this can be a great way to actually save money in the end. (Check Bankrate.com for current averages). Remember, to calculate the total cost of the loan from start to pay-off.

Credit Counseling

Credit counseling agencies may help you get out of debt, though they don't actually consolidate your debt.

Instead, payment plans (usually with lower interest and fees) will be worked out for all of your eligible debts. You'll make one monthly payment to the counseling agency, which will pay all your creditors.

Participating in a credit counseling program generally won't hurt your credit rating, and if you stick to the plan you can be out of debt in three to six years. But be careful which agency you work with. If the counseling agency pays your bills late, you'll pay the price since you're still responsible to the lender. It happens.

Debt Settlement

Debt settlement is another option that's become increasingly popular with consumers who have a lot of debt and can't, or won't, file bankruptcy. You stop paying your bills and instead make a regular monthly payment to the settlement company. Your creditors contact them, and not you, about your overdue bills. As your accounts fall further behind, the negotiation company will settle your balances - usually for 50% of the balance or less (including fees) depending on the debt. Most people can be out of debt in less than two years or less using these programs.

It's not perfect. Your credit rating will be hurt in the short run and you must be certain you're dealing with a reputable company or the money you pay each month could disappear. Still, for consumers who can't shoulder the burden of debt they have now, it can be a very good option.

Retirement Loans

If you have a 401(k), 403(b) plan or certain types of pension plans, you can borrow against your nest egg. (You can't borrow against your IRA.) It's easy, with no income qualifications or credit check.

The key here is to borrow against your retirement account, rather than withdraw from it early so that you don't end up paying taxes and a 10% penalty. Also, if you leave or lose your job, you may have to pay your loan back immediately or pay taxes and penalties for an early withdrawal.

These loans typically offer low interest rates, and interest is paid to you, since you are the lender. While tapping your next egg like this can short-change your retirement, so can costly debt payments. If you are in your 20's and 30's,you obviously have more time to rebuild a retirement nest egg, but even if you're in your 40's or 50's, you will want to weigh the cost of paying the high interest of the debts over time, versus borrowing from your retirement account. The return you get from paying off high-rate debts is guaranteed - while the stock market isn't.

Rapid Repayment

There is a mathematically optimal way to pay your debts. Choose a fixed level monthly payment, and commit to it each month. Pay as much as you can on the highest rate debt first, while payment the minimums on the rest.

I almost always suggest consumers with debt start by creating one of these plans. Many people who do so find they don't even need to consolidate to get out of debt in the next few years. They just need a plan and they can do it on their own.

Overview

The biggest mistakes people make when it comes to consolidation are:

A. Not having a plan for paying the debt off after they've consolidated, and

B. Procrastination. Waiting for the "perfect" solution to come along almost always means you'll end up deeper in debt. Choose your approach, and start getting out of debt today!

Accumulating a large amount of debt can be truly detrimental to your quality of life, and the lives of your loved ones. In short, debt is accumulated when a person spends more than they make for an extend period of time, making purchases through loans and credit cards instead of with money they actually have. If you are facing severe debt and are afraid of bankruptcy or foreclosure, there are a variety of options and programs developed to give you a clean financial start, including debt consolidation.

In short, debt consolidation involves taking all of your individual debts (loans, credit cards, etc.,) and blending them into a single, more manageable debt. Not only is it more convenient to make one, large monthly payment, but debt consolidation may also decrease the actual amount that you owe. In the end, debt consolidation is designed to help you owe less money so that you can reasonably pay off all of your outstanding financial obligations.

Home equity loans are one type of debt consolidation. A home equity loan consolidates all of your loans and uses your house collateral in the event that you are unable to pay. In order to take out a home equity loan, your house must be somewhat valuable. Typically, home equity loans are a good option if you want a lower interest rate. However, if there is any chance that you won't be able to make monthly payments even after you have consolidated all of your debts, using your home as collateral may not be wise.

Combining all of your debts onto one credit card is another type of debt consolidation. If you are paying high interest rates and want to combine your payments into one, paying off you debts on one new credit card may be a good idea. Many times, new credit cards come with low interest rates or other incentives that may help lower your monthly payment. When considering consolidating your debts onto one credit card, make sure you understanding the interest rates of your new card and be sure that you are able to pay off the debt before the low interest rate runs out.

Sometimes, taking out a personal loan is the best way to consolidate your loans. A personal has fixed payments but is unsecured. Personal loans may give you more time to pay them off than your current loan situation, but if your credit rating is low you may have trouble getting approved for a personal loan. Some companies offer special debt consolidation loans specifically designed to help people who are unable to meet their financial obligations. Ideally, these types of loans have lower interest rates and allow you to pay off your debt over a longer period of time.

Debt consolidation is not alone is just the kind of debt management ,Read the article to find out more,Consolidating debts is a debt management strategy that must be completely understood before it is undertaken. Many people think this strategy is the only one that is available for their particular financial situation. Typically, it is only after speaking with a skilled professional credit counsellor or financial specialist that many people realise there are other options available to them beyond consolidation or bankruptcy.

When people speak about debt consolidation, they are typically referring to their unsecured debt. Unsecured debt is debt that is not secured by anything of value. This includes items such as a house or auto. Typical unsecured debts include personal loans, credit cards and store cards.

When engaging in a consolidation of your debts, you could be securing your previously unsecured loans. Usually this is accomplished by using your house as the asset with which to secure what you owe. Sometimes this can be accomplished with your auto instead. Although this strategy can pay off all that unsecured debt, it will effectively make it possible for you to lose your house, or auto, if you do not make the payments on the consolidation loan as agreed upon.

For this reason, it is wise to seek the advice of a professional credit counsellor who is knowledgeable in consolidating debt as well as a wide variety of other debt management plans. These other debt management plans could be more suited for your particular financial situation.

A skilled financial professional credit counsellor can help you negotiate with those companies that you currently have unsecured credit with. These negotiations can often include lower payments as well as lower interest rates. With this type of debt management plan, you will be able to pay off what you owe knowing that your house, or auto, is not in danger.

Consolidation often offers a lower interest rate. This welcome occurrence, however, is because you are also assuming more debt. By making your unsecured into secured debt, you could be ensuring that you will be paying for that new debt for a much longer time than you originally thought. This is because it must be added to your already existing secured debt. This can make the secured debt seem almost unmanageable.

Having a credit counsellor working on your behalf can open up many other options to debt management besides consolidating debts. Your professional credit counsellor will help you decide which course of action is the best for you depending on your financial situation.