Six Effective Consolidation Solutions

We've summarized six of the most effective debt relief solutions below. Learn the smartest ways to consolidate high-interest debt here.

1. Use your home equity. You would be hard-pressed to find a debt relief consolidation loan with better interest rates than a home equity loan. Your home serves as collateral with this type of loan, which means the bank takes less of a risk in loaning to you. As a result, you receive a loan with unbeatable interest rates that will help you pay off your credit cards and other unsecured debts. Additionally, the interest you pay on home equity debt consolidation loans is tax-deductible, thus saving you even more money.
2. Do cash-out refinancing. This debt relief option also takes advantage of your home equity but with a different approach. With cash-out refinancing, you take out a new mortgage for an amount larger than what you owe on your current mortgage. You take the difference between the two amounts in cash and apply it toward your debts. You can even keep your mortgage payments the same after you refinance by stretching the larger loan out over a longer period of time.
3. Refinance your auto loan. If you have equity in your vehicle, you can use your car as collateral for a secured debt consolidation loan. A common problem with this method of debt relief is that the car may not last as long as the loan. In other words, you would end up owing more on the vehicle than it is actually worth. If you had to buy a new car, you would end up losing money on the deal, possibly canceling out the savings you reaped from debt consolidation.
4. Haggle with your credit card companies. Most cardholders don't realize that they have every right to negotiate with their creditors. In fact, this is often a very effective method of debt relief. If you've paid your bills on time and have been a cardholder for several years, your creditor will be especially willing to work with you on interest rates, monthly payments, and other terms. Try to talk your creditors into giving you a more reasonable rate. If they refuse, you can always move your balance to a different credit card.
5. Apply for a personal loan with your bank or credit union. For consumers with fairly good credit, a personal loan is another debt relief option. More than likely, the interest rate you receive on a personal loan will be lower than what you're paying on your credit cards. In that case, you can use the personal loan to pay off your credit card balances.
6. Talk to a credit counselor. This option can supplement any other debt relief strategy. A credit counselor will point out what you're doing wrong with your budget and help you design a repayment plan that works for both you and your creditors.