How to Consolidate an Account

Consolidating accounts can reduce your debt and put some additional money in your pocket.

Debt is the great killer of personal finance. Like a shark, it is constantly on the prowl, seeking out unwary or reckless borrowers. Debt is a fearsome yet useful beast. When used properly, it can provide greater purchasing power than would otherwise be attainable. For consumers already in debt, they are in the shark's mouth. They can take the crucial first steps toward escaping from debt by consolidating their accounts.

Instructions

1. Find a lender that offers low rates, preferably one with an established prior relationship. The lower the interest rate, the lower the monthly payments. Debt consolidation is not pretty, so don't expect super-low rates. Credit card debt, for example, is notoriously toxic. Transferring balances only makes sense if the debt can be paid off in the low introductory rate period.

2. Bring documentation to demonstrate the need for consolidation. If applying for a consolidation loan, previous loan statements, credit card statements and bank statements will be needed. Show the lender the documents to establish need and intent to repay. If the debt cannot be repaid using one mean, such as a balance transfers, seek out another.

3. Meet qualifications for debt consolidation. Various lenders will have different criteria that must be met. Some lenders will require some form of collateral, such as automobile title. The one standard that universally applies is the terms of the original loan must allow the debt to be paid off on the final payment.

4. Paying the consolidation agency their fees is usually the first step in the closing process. Bring common sense to the closing meeting as well. Lenders don't have the right to bully or "persuade" consumers into signing anything. If it sounds fishy, it probably is.

5. Lower monthly payments by stretching out the repayment plan. Greater length translates into lower payments, which can free up essential cash. Once the debt is fully repaid, prepare a strict budget and stick to it no matter what happens.

References

• MSN Money:The Basics