Sometimes one of the best ways to reduce your debt is to consolidate it into one monthly payment. Doing this also has the added benefit of lowering the interest rate you are paying from high interest credit card rates to lower interest amounts. When you are making one payment a month that is substantially lower than all of your credit card bills combined, that leaves you extra money each month to add into your budget. You can use that extra money to pay off your consolidation loan and become debt free that much faster, or you can use it to help with living expenses so that you dont go back into credit card debt. Whatever you choose to use the extra money for, it is sure to help your financial well being.

Home Equity Debt Consolidation Loan

Most people that get approved for a debt consolidation loan use the equity in their home as collateral. If you own a home, and it has gone up in value since you purchased it, you can borrow against the difference in what it is worth now and what you paid for it. This is an easy loan to get approved for because it is a secured loan that the bank feels pretty safe it will get back. Many lenders will even give you a home equity debt consolidation loan even if you have bad credit.

Unsecured Debt Consolidation Loan

If you do not own a home, or the home you own does not have enough equity in it to borrow against, it is still possible for you to get a consolidation loan. In order to get approved for an unsecured consolidation loan, you need to have good credit. These loans are usually done through a credit counseling agency. The agency will have someone sit down with you and work up a budget that you can live with and then they will talk to each of your creditors until they have negotiated the absolute lowest interest rates and balances possible. The company then has you make one easy payment to them and they in turn pay off what you owe to each credit card company.