How to Consolidate Credit

Do you want to simplify your finances? Are you looking for a way to lower your interest rates? If so, a debt or credit consolidation can help. Credit consolidations merge your outstanding debts. You can apply for a loan, use the proceeds to pay off your debts, and then pay back the loan. This creates one monthly payment. There are several ways to obtain a credit consolidation. And before choosing a method, it's best to familiarize yourself with the different options.

Things You'll Need

• Collateral Credit card

Instructions

1. Get a debt consolidation loan. Contact a local bank or credit union and inquire about debt consolidation loans. You'll need good credit and collateral to qualify. If you meet the bank's lending requirements, you'll receive a lump sum to pay off your outstanding balances.

2. Consider a home equity loan. Home equity loans or lines of credit use your home as collateral, and you can use the money for any purpose -- including credit consolidation. Apply for a low-rate home equity option and use the money to eliminate your debts.

3. Refinance your home loan. If you have adequate equity in your home, consider a cash-out mortgage refinance. This involves applying for a new home loan, and borrowing money from your equity to pay off debts.

4. Apply for a balance transfer credit card. Get a zero-percent interest or low introductory rate credit card and transfer your high-interest credit card balances. Lower rates help you pay off the balance sooner.

5. Select a credit consolidation agency. If you can't qualify for a loan or credit card, choose a credit or debt consolidation agency. They'll work directly with your creditors to negotiate lower rates and a new payment arrangement, which can help you eliminate your debts.

Tips & Warnings

• Choose a non-profit credit consolidation agency. Cash-out refinances increase your mortgage balance, which can increase your monthly payment. Balance transfers often involve a transfer fee.

• After consolidating your credit and reducing your balances, adopt good credit habits -- use cash, pay off credit cards at the end of the month and avoid maxing out accounts.