Help for Credit Debt Consolidation

Having several unsecured debts such as credit cards can be a logistical nightmare, keeping track of due dates, payment amounts and interest rates. Consolidating them into one loan with one payment can make life much simpler. Credit counseling agencies and some reputable debt consolidation companies can help. Or you can do it on your own. Just be careful not to rack up balances on your newly paid credit cards.

Debt Management Plans

Many credit counseling agencies offer debt management plans by which consumers pay one payment per month for all unsecured debt and counselors pay the creditors. The disadvantage to this approach is that credit counseling agencies often require consumers to adhere to a strict budget and cut up credit cards to avoid building more debt. The best credit counseling agencies are nonprofit and serve clients regardless of their ability to pay, such as those with the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling (see Resources).

Debt Consolidation Companies

For-profit debt consolidation companies have a reputation roughly equivalent of used car salesmen. Many charge high fees so that you wind up paying much more than you would have if you'd paid the debts yourself; some are unprofessional and take your money to pay debts and then fail to pay the debts. However, if you choose to go this route, it's a good idea to see if the company is accredited by the Better Business Bureau. You can see if there are BBB-accredited debt consolidation companies by checking your zip code on the BBB website. Some of those listed are nonprofit agencies.

Consumer Loans

Add up your balances, and see if you can qualify for a consumer loan at a bank or credit union that will pay off all the debt. Your interest rate will depend on your credit rating as well as where you live, your debt-to-income ratio and other factors. With a consumer loan, you only have one payment per month at a steady interest rate.

Home Equity Loan

Sometimes you can borrow against the equity in your home. Let's say you owe $100,000 on your $150,000 house. You may be able to borrow $30,000 or more from the money you paid on the house and pay off other debts. The drawback is that you lose that equity in your home and under some circumstances, such as losing a job or having another financial emergency, could put yourself at risk for losing the house.