How to consolidate debt

Combine your debt into one manageable chunk to minimize interest rates. Learn how to consolidate your debts with these helpful steps from Howcast.

You Will Need

* Lower interest rates on your credit cards
* A card with no interest for six to 12 months
* A debt consolidation loan, home equity loan, or home equity line of credit
* Discipline

Step 1: Avoid debt-consolidation firms
Stay clear of debt-consolidation firms. They can’t do anything for you that you can’t do yourself. *Tip: Remember, Debt-consolidation firms that advertise themselves as “nonprofit” are not necessarily free.

Step 2: Call your creditors
Call your credit-card companies and try to negotiate lower interest rates. Be persistent – if they say no, ask to speak with someone else, or call back in a few weeks and ask again.

Step 3: Investigate new cards
Check around to see if you can get a new card with a promotional rate of six months to a year of no interest.

Step 4: Transfer balances
If your lowest-interest credit card has available credit, consider transferring other balances to that card. But do some number crunching first: Exorbitant transfer fees might make debt transfer pointless.

Step 5: Apply for an unsecured loan
Shop around for an unsecured debt-consolidation loan with a lower interest rate than that of your lowest-interest credit card. If you qualify for one, pay off your credit cards with the loan. Just be aware that they are nearly impossible to obtain in a tough economy.

Step 6: Apply for a home-equity loan
If you own a home, consider applying for a home-equity loan or line of credit; the interest you pay is often tax-deductible. Just make absolutely sure you can make the payments so you don’t put your home in jeopardy.

Step 7: Stop spending!
Put the brakes on unnecessary spending so you don’t incur more debt while paying off what you already owe.