If you have a lot of debt from loans and credit cards, I’m pretty sure you’ve considered getting debt consolidation. Putting the loans together into one payment makes it easier to manage and you may even get a lower interest rate than the one you’re paying now. Here’s some info about finding the right debt consolidation program for you.

Debt Consolidation

Just what is a debt consolidation program? It’s a strategy in which rather than making individual payments to multiple credit card companies or lenders monthly, you make just one to a single lender — hopefully at a lower interest rate.In addition to credit card obligations, you could use a debt consolidation loan to restructure medical debt, auto loans, payday loans, student loans, and personal loans.

What is the Debt Consolidation Process?

You’ll find a detailed explanation of this at Bills.com inside guide to debt consolidation programs. However, in a nutshell, you should first know which type of debt consolidation you want to pursue – a personal loan, a balance transfer card, or a home equity loan.

Next, look around to see what’s being offered and what you’re qualified for, before applying. After that, you’ll use the loan to wipe out current debt. If you’re going the balance transfer route, you’ll shift your existing credit card balances onto the single credit card.

Subsequently, you’ll begin making payments on your new loan. You may be able to establish an automatic payments system so that you don’t miss a payment. Apply any extra cash you run across to the loan to pay it down faster.

Remember that you’re not alone; millions of Americans have loans they struggle to manage, and a lot of people feel just like you.

Debt Consolidation Loan: These are personal loans that merge multiple loans under one loan with a set monthly payment. Some lenders will allow you to consolidate up to $50,000. However, these loans only make sense if you can get a better interest rate than what you’re paying in aggregate on current debt. If you won’t save money, try another financial strategy.

Balance Transfer Card:Using a balance transfer credit card can help you eliminate your debt and minimize your interest rate. Such a card consolidates multiple credit card debts onto one card with a lower interest rate.

Most balance transfer cards offer a zero-percent APR promotional period – usually for 12 to 21 months. If you could pay off all or nearly of your debt during the introductory period, there’s a possibility you could save beaucoup bucks in interest payments. Be careful, though: if you have a sizeable balance remaining after the introductory period is over, you may incur even more debt in the future, since these cards tend to have higher interest rate than other kinds of consolidation.

Home Equity Loan:This tack is also called a second mortgage and involves your tapping into your home’s equity. Most such loans have repayment periods of between five and 30 years, and you can usually borrow up to 85 percent of the home’s value, less any outstanding mortgage balance.

These loans usually have lower interest rates than credit cards and loans, since your home is collateral – you’ll lose your property if you default.

When Is Debt Consolidation A Good Idea?

If it’s a challenge to keep track of multiple monthly debts, a debt consolidation loan can help by making repayment simpler. It also helps if you have a credit score of 670 or higher, since that way you can get a loan with a lower interest rate than what you’re now paying.

When Should You Hold Off?

If your loan carries a rate that is higher than the rates on current debts, you likely won’t save money through debt consolidation, in which case consolidation may not be a great idea. Also, borrowers who aren’t committed to lowering their debt over the long run may wind up incurring new debt on the cards they’ve just paid off, putting them right back in the hole.

Now that you know a bit about finding the right debt consolidation program for you, you can be well on your way to a new, debt-free life.