Manage your debt, by consolidating your debt

If you are facing a mountain of debt, consolidating your bills may be beneficial. While it doesn’t work for everyone, debt consolidation can be a way out of the red for many. What many people don’t know, however, is that there are a number of ways that debt consolidation can be achieved.

When you are researching ways to manage your debt, through consolidation, here are five ways to consider:

• Mortgage Refinance

If you own a home, and have equity built in that home, a cash-out refinance can give you the money you need to pay your bills. Sit down with your bills and come up with a grand total; you’ll need this number when you apply for a cash-out refinancing loan. Your lender may even be willing to pay these debts directly; it won’t hurt to ask. In addition to paying off your bills, refinancing your home may get you a lower interest rate and a smaller mortgage payment. You will also qualify for a tax deduction on next year’s federal income tax returns.

• Balance Transfer

If your credit is still in good-standing, consider applying for a credit card that will allow you a zero percent balance transfer. By transferring the balances you are carrying on other credit cards, you will not only have the benefit of making one monthly payment, but you will save money in interest in the long run. Do make sure, however, that you look to see how long the introductory rate will last and what your interest rate will be raised to once this introductory period is complete.

• Unsecured Loan

Though these loans are becoming more difficult to find, they are still being offered by some lenders. By taking out a single loan to pay off your debt, you will pay your debt off earlier than you would have otherwise, saving you hundreds, if not thousands, of dollars in interest. Before taking out a loan, be sure to look at the terms and conditions; if you aren’t going to save money overall, the only benefit you’ll find is in making one payment each month rather than several.

• Debt Settlement

If you’ve found yourself with an insurmountable pile of debt, using a debt settlement company may be an option. A company such as this can contact your debtors, negotiate a settlement with each and then require a single monthly payment from you. Do understand, however, that this option will have a negative impact on your credit score; your debts will be marked as settled for less than what was due.

• Credit Counseling

A credit counseling service works in much the same way as a debt settlement service with one major difference: you will pay back 100 percent of what you owe. A credit counselor, acting on your behalf, will negotiate lower interest rates on your various accounts and then charge you a set amount of money each month. Out of this payment, the credit counseling company will pay your bills for you. This can bring a great deal of relief as you will only be making one payment every month and the calls from creditors and collection agencies will cease.

If you are facing debt that has you overwhelmed, consolidating your bills can provide tremendous relief. Not only will your bills be paid sooner, but you may just see your credit score not only survive, but improve throughout the process. The worst thing you can do, if you are facing debt, is to ignore it; explore any of these five options and start climbing your way out of debt today.

Sheila Barnett writes on personal finance and budgeting for http://www.financialcalculator.org, a site with helpful tools and information about investments, loans, net worth and even a debt calculator.