How to Consolidate Debt

When credit card and loan debt gets out of hand, many consumers look for ways to consolidate debt. When you consolidate debt, you are combining all the debt you have incurred and rolling in to one large loan, and then making payments on just that loan every single month. Consumers choose consolidate debt when they can no longer handle their monthly payments for everything they owe, to save money on interest rates, or to clear their credit. If you are looking into ways to consolidate debt and want to learn more about it, read on to learn how to consolidate debt:

Difficulty: Moderate

Instructions

1. Understand What It Means to Consolidate Debt
   
   When you consolidate debt, you are paying off every single debt that you owe with one large loan. This means that any credit cards, student loans, and any other unsecured loans you roll into the debt consolidation loan will again be completely cleared. Some debt consolidation companies can often negotiate more favorable terms – lower interest rates, lower the full payment – when you get the loan to consolidate debt through them. The catch to debt consolidation, though, is that most lenders will require you to close every open credit line – credit cards included – that is being paid off with the loan. This will effectively prevent you from racking up even more debt while you are still paying on the loan you used to consolidate debt in the first place. Also, secured loans are not eligible to be included in your loan to consolidate debt.
   
   Debt consolidation makes it much easier for consumers to pay off their debts. After you consolidate debt, you only have one monthly payment to make, instead of making dozens of payments at varying times during the month. When you consolidate debt, you can often get an interest rate on the consolidation loan significantly lower than the varying interest rates on your other lines of credit, which can save you a significant amount of money. It can also do wonders for your credit score when you consolidate debt; if you consolidate debt with a loan before your credit begins to go sour, creditors will see that you were able to pay off all of your loans at once – although the loan you took out to consolidate debt will be on your history, as well.

2. Tally Up Your Total Debt Before Applying
   
   Before you can apply for a loan to consolidate debt, you will need to figure out exactly how much you owe. To do this, contact every company you have an open credit line with, and ask for a paper statement reflecting the current total amount you owe on your account with them. Calculate the total amount for every open line, and this is your total amount of debt. Don't be surprised if the number exceeds $30,000; the average consumer accumulates around $55,000 of unsecured debt (not included their mortgage) when they finally apply for consolidate debt.

3. Visit Your Bank First
   
   Your bank is a great place to start when you want to consolidate debt. Most banks have some type of consolidation program in place; at the very least, they'll be able to extend you a loan to consolidate debt. If you've been a long-standing customers in good status, you are also in a position to negotiate better terms, like a lower interest rate or extended payments – never be afraid to ask, because the worst they can do is say no. Make it clear that you want to apply for a loan to consolidate debt, not a home equity loan. Many lenders will try to offer home equity loans as an option to consolidate debt, because the credit line will be secured against your house. This means that if you default on payments, you could lose your house. Unless this is your only option due to extremely poor credit, never accept a home equity loan as a way to consolidate debt.

4. Talk to Lenders You Know and Trust
   
   If you have no luck with your bank, try another trusted lender that you have worked with in the past. Quite a few big lenders have debt consolidation programs available to consumers; the fact that you had (or currently have) an account with them may, again, work in your favor. Always contact lenders directly, or visit their local branch if they have one. You are more likely to receive better results by talking to a debt specialist over the phone or in person then you are by applying for a loan to consolidate debt using their website. Be sure to bring your account statements and know the final number you need a loan for when you call or visit.

5. Try Lending Tree for Loans to Consolidate Debt
   
   Lending Tree is a fabulous tool to help you consolidate debt. The website allows you to request quotes, compare interest rates and terms, and apply for loans to consolidate debt right online. This is a great way to review multiple loans to consolidate debt with different companies all at once, and saves you loads of time, so you don't have to contact each company directly. Visit Lending Tree and search for “personal loans” to consolidate debt. Punch in your total amount and your personal information, and check the results. You can always contact a company that offers you the most favorable terms directly to see if they can give you better terms when you apply with them directly. Check out Lending Tree's website below to get started:
   
   http://www.lendingtree.com/****/