Credit Consolidation Help

If you are paying too high an interest rate on your credit accounts, credit consolidation can help you acquire a cheaper rate. And with consolidation, you can merge your outstanding credit accounts into one loan or bill. Explore consolidation options first, and then select the method that works best for your situation.

Second Mortgage

Taking out a second mortgage on your home, which refers to getting a loan using your home's equity as collateral, can provide a means of consolidating your credit cards and other loans. This method works by using the second mortgage funds to pay off all your credit accounts. This eliminates balances on your previous accounts, and results in only one loan payment -- the second mortgage -- which often has a lower interest rate. Make monthly payments to the lender to pay off the second mortgage.

Transfer Balances

If you don't want to meet with lenders and apply for a loan or you don't own a home, apply for another credit card with a higher credit limit and move all your credit card balances to the new account. Balance transfers are advantageous because some card companies offer low introductory rates or 0 percent interest on transfers. This benefits consumers who plan on paying off the debt before card companies issue a permanent rate. Compare balance transfer fees before accepting an offer.

Debt Management Companies

Seeking help from debt or credit counselors can help with managing consumer debt. Consolidation using a firm or agency doesn't involve a loan to pay off your existing debt. Rather, consolidation companies take all your accounts and combine them into a single bill with a lower interest rate. Choosing this route will place a freeze on your credit accounts, meaning you're unable to use these credit cards. This freeze alleviates new charges and facilitates the debt-reduction process. Consolidation agencies accept one payment each month and apply this payment to your debt. Agencies remove credit freezes if you cancel the service.

Personal Loan

Personal debt consolidation loans from a bank or credit union also provide a means of consolidating your credit. Getting this type of loan will require a good credit history demonstrated by a high credit score. Lenders establish the minimum credit score requirement, but a score in the 700s can help you qualify. Plus, personal debt consolidation loans will need collateral to secure the funds. A car title, jewelry or electronics can work as collateral or security for the loan. Beware, though, these loans often have high interest rates that may not be much less than what you are paying on credit card debt.