Debt Consolidation Self-Help

You don't necessarily have to recruit the assistance of a debt consolidation company to pay off your financial obligations. Here are several self-help strategies you can employ to consolidate debt.

Borrow a home equity loan. If you own a home, cashing in your equity is probably the most affordable way to begin eliminating debt. Home equity loans, or second mortgages, tend to have much lower interest rates than loans or programs provided by the debt consolidation industry. You can use the proceeds of the loan to pay off your high-interest credit cards or other unsecured debts. Keep in mind the risk of home equity loans, however—defaulting on payments could mean you lose your home
Refinance your mortgage with a cash-out option. Again, if you are a homeowner, you have more alternatives than a typical debt consolidation industry consumer. You might consider doing a cash-out refinance on your existing mortgage to consolidate debt, for example. Cash-out refinancing involves taking out a loan for a larger amount than your existing mortgage and pocketing the difference in cash. You can use the cash however you wish.
Refinance your car loan. Refinancing an auto loan won't provide the significant savings that the debt consolidation industry can, but it's at least a good start to overcoming debt. If interest rates have dropped or your credit has improved since you bought your car, you might be able to get a new car loan with a lower interest rate. Talk to your bank or credit union about your options.
Apply for a personal loan. For consumers with relatively good credit, a personal loan is another viable way to consolidate debt. Credit unions almost always have lower interest rates than banks, so start there if you belong to a credit union. A personal loan from a credit union will have an interest rate of about 11%, which is a significant reduction from the 16%-30% average interest rates of credit cards.
Talk to your creditors. Some debt consolidation customers mistakenly believe that the terms of their credit agreements are nonnegotiable. In reality, cardholders have the ability to negotiate just about any aspect of their agreements. If you contact your creditors, you might be able to talk them into making your rates more affordable or your terms more reasonable.

Still not sure you're ready to do it yourself? Get more answers to commonly asked questions now.