Consolidating debts presents a simplified method to manage bills and debts. People with a lot of debt may write several checks a month and mail these payments to separate creditors. By means of consolidation, debtors make one payment to one creditor each month. There are several ways to consolidate debts, and some people choose to use debt consolidation services to manage their bills. While these services are useful, consolidation agencies may report "third party assistance" to the credit bureau. Having this notation on your credit report can hurt your credit. Rather than risk credit damage, consider a loan to consolidate.
Check your interest rate on existing debt. The rate you pay on credit cards and other loans determines the monthly payment. A debt consolidation with a lower rate helps reduce payments. Pull out statements and look at your current interest rates. Aim for a lower rate when contacting lenders to consolidate your debt.
Make wise credit moves. Banks who offer consolidation loans vary in their credit score requirements. Get your score online, and if it's below 700, improve your score before applying for a loan to consolidate debt. Paying every bill on time brings up your personal score.
Take out a loan. Debt consolidation loans are available from banks and mortgage lenders. Approach your personal bank or credit union and use collateral, such as a car or boat title, to secure the loan. Another approach involves using home equity as collateral. Refinance your mortgage loan and take cash from your equity, or apply for a home equity loan.
Get more than one quote for a consolidation loan. Regardless of the type of loan you decide to acquire, compare interest rates and loan terms to determine the best deal. Call a mortgage broker if you decide to refinance or get a home equity loan, or speak with two or three banks for a free, no-obligation, debt consolidation quote.
Valencia Higuera is a freelance writer from Chesapeake, Virginia. She has contributed content to print publications and online publications such as Sidestep.com, AOL Travel, Work.com and ABC Loan Guide. Higuera primarily works as a personal finance, travel and medical writer. She holds a Bachelor of Arts degree in English/journalism from Old Dominion University.