How to Rotate Consumer Debt

When it comes to owing debt, high interest rates on debt can be frustrating. The higher the interest rate, the more money goes into the lender's pockets instead of paying down the principal balance. This makes the lender more money, and keeps you in debt for a longer period of time. By moving debt from one lender to another, you may be able to reduce the interest that is owed on that debt. Here are some tips on how to rotate your consumer debt.

Instructions

1

Read your account statement. Before you rotate your debt to a new lender, you want to check the terms that you already have with your current lender. Check to see the interest rate you are being charged on your debt. For discussion purposes, consider that someone owes $10,000 at 20 percent on a credit card.

2

Shop for a new lender. In the same way that people refinance their mortgage payments when a new lender offers a better rate, you are in essence refinancing your consumer debt. Look for a lender who is offer better rates. Such lenders are other credit card companies, banks offering home equity lines or credit unions offering personal loans.

3

Apply for the loan. After filling out basic personal information, the new lender will probably ask for your Social Security number so that it can look up your credit report. Based on your credit history and financial health, the lender will approve your deny your loan request. If your request is approved, you can rotate the debt.

4

Move the money. Instruct the new lender who has approved your loan that you'd like to pay off the other lender. The new lender will then send the check to the old lender, paying off that debt. You will now make monthly payments to the new lender. For the example listed above, if someone reduced his $10,000 loan from 20 percent to 10 percent, the minimum monthly payment would be reduced from $265 to $183. The extra $82 per month will allow you to pay down your principal debt much faster.