Options for Consolidating Debt
The expression is that "There's more than one way to skin a cat", and the same holds true for debt consolidation. Here are a few of the options that might be used.
Personal Loans
One way to consolidate your debt is to take out a personal loan with your local credit union or bank. If your credit score is sufficiently high enough, you can get a low-interest loan that will allow you to take the money you've been given and use it to pay off several other debts or all of your other debts. In the end, you will still owe the same (principal) amount of money, but now you will only have one payment to concern yourself with. If your credit score is not sufficient to secure a personal loan, you might have to put forth collateral like your car or property in order to convince the lending institution of your credit-worthiness.
Home Equity Loan/Line of Credit
Owning a home offers a unique opportunity for debt consolidation by means of a home equity loan or a home equity line of credit. The word "equity" refers to the difference between what you owe on your home and its market value as determined by a professional appraisal. A home equity loan will give you a loan for a certain percentage (usually about 75%) of the difference between your home's value and how much you owe on the mortgage (if you owe less than your home is worth). This loan can be used to pay off debts, leaving you with a single, second mortgage. A home equity line of credit uses the same principle, only rather than receiving a single loan, the equity in your home is used as collateral for a credit card where the maximum equals your equity. So you can charge to, and pay off the card as often as you need to.
A downside to using your home equity to consolidate debt is that it is a secured loan - secured against your house, that is, which can be a very expensive risk since defaulting on the loan could mean losing your home.
Using Credit Cards to Transfer Balances
Another alternative for consolidating debt is by using one credit card to pay off other credit cards (or loans, using a cash advance). Be wary of introductory interest rates that entice you to do this however, as they may be very short term, ultimately causing you to pay more for your debt than you had before the consolidation.
Debt Counseling Service
The quickest and most hassle-free way to consolidate your debt is probably through using a counseling service or credit consolidation company. These professional firms have experience working with most of the nation's leading lenders and will be able to negotiate skillfully on your behalf perhaps to lower your interest rates or even the principal that is due. The consolidation company then comes up with a total amount due, and your monthly payments and you will make the payment each month to them rather than to your other lenders.