Home equity loan or home equity line of credit (HELOC): If you own a home and have built up equity, you can borrow against that equity with a home equity loan or HELOC to consolidate debt. These can be easier to get approved for and can come with lower interest rates. But watch out for closing costs and weigh the risks of using your home to guarantee this loan.

For most respondents, a debt consolidation loan was a good choice. Twenty-eight percent were able to lower monthly payments using their debt consolidation loan, 27 percent lowered or eliminated debt and 9 percent improved their credit score. But debt consolidation loans weren’t a good choice for all respondents, as 9 percent accrued more debt, 5 percent paid more interest overall and 2 percent lost their collateral.

Your loan funds are automatically deposited right into your bank account, which gives you the flexibility to choose which bills, credit cards, or loans you want to pay down. Depending on your bank, it may take a few days for the money to appear in your account after your loan is issued. Consolidating debt reduces the amount of bills to keep track of each month, and it can save you money if you lower your rate and avoid credit card fees.
Debt management and debt relief are terms for programs that allow a company to manage debt repayment on your behalf. Typically, you’ll make a single payment to your debt management company, which can negotiate debts and monthly payments. The service provider will divvy up your payment to each of your creditors, often keeping part of it as a monthly administration fee.
Debt consolidation is a debt management strategy. The term describes the process of rolling one or multiple unsecured debts into another form of financing. In other words, you take a new loan and use it to pay off existing debts, which leaves you with just one loan to worry about. Used properly, it can reduce your number of bills, lower the cost of carrying debt while you pay it off and help improve your credit score over time.
If you’re financially drowning, of course you can declare bankruptcy. The problem is that bankruptcy is a serious derogatory mark on your credit. It won’t prevent you from getting credit in the future, but for a time some credit products will be unavailable to you and others will come at very steep prices. Also, not all debts can be discharged in a bankruptcy.
“One of the more concerning trends is the increased use of enforcement, particularly through the high court, by the water companies,” says Andy Shaw, one of the charity’s debt advice coordinators. “Historically we might have seen cases where clients had got behind with their water bills progressing as far as a county court judgment but no further. The water companies seem to have become more aggressive in their debt collection methods.”
To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you.

Check whether you’re applying for a secured or an unsecured loan: If it’s a secured loan (backed by an asset such as your car) and you fail to make your payments, the lender can repossess the item. Unsecured loans, on the other hand, aren’t backed by this kind of collateral, but often come with higher interest rates. Make sure you consider the trade-offs before you apply for the loan.
Often times, after debt consolidation, consumers will find themselves accumulating credit card debt again very quickly. If they do not change their spending habits, the amount of monthly cash flow created with debt consolidation could dwindle quickly. Those who have never learned to budget and manage their money will find that very little will change for them with a debt consolidation loan. They will likely continue to overrun their monthly income and rely on credit cards to make up the gap.
Credit scoring models usually take into account how much you owe compared to how much credit you have available, called your credit utilization rate or your balance-to-limit ratio. Basically it's the sum of all of your revolving debt (such as your credit card balances) divided by the total credit that is available to you (or the total of all your credit limits).

Most credit counselors offer services through local offices, online, or on the phone. If possible, find an organization that offers in-person counseling. Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate nonprofit credit counseling programs. Your financial institution, local consumer protection agency, and friends and family also may be good sources of information and referrals.
When you combine all your debts into just one loan, you’ll only have a single loan payment to contend with each month, instead of multiple bills due to several different creditors. A debt consolidation loan should, therefore, make it much less likely that you’ll have a late payment, or miss one altogether, as you’ll only have one payment to make each month.
Your loan balances also affect your credit score in a similar way. The credit score calculation compares your loan current loan balance to the original loan amount. The closer your loan balances are to the original amount you borrowed, the more it hurts your credit score. Focus first on paying down credit card balances because they have more impact on your credit score.

Home equity debt consolidation loans, a type of secured debt consolidation loan, offer a fixed interest rate. Interest paid on a home equity loan is usually tax deductible, while credit card interest is not. However, home equity loans for debt consolidation can be risky, as your home may be foreclosed on if you can’t pay your loan. “The danger is if you eat up a significant part of your home equity,” says Gerri Detweiler, education director of business credit website Nav.com. “Make sure you have plenty of cushion in there so if something happens and you had to sell your home, or you had to move ... you don’t end up losing your home.”
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