Debt consolidation is a common tactic used by people who are over extended or close to being over extended. People in this situation may have several options available to consolidate debts and reduce monthly payments. By reducing monthly payments the person gets some relief from being over extended. It is important to use discipline and manage the disposable income properly to bring down the overall amount of debt and to begin to save for the future.
Option one
If the person has good credit and is receiving credit card offers, select an offer with a 0% trial period of at least six months but preferably 12 months. Transfer the balance from other credit cards beginning with the highest rate card. Make sure to follow all conditions of the new card so that the interest does not kick in before the trial period is over. Every payment made on the new card will reduce the principle with no interest accruing. If there are no credit card balances transfer loan balances to the new card. Over the course of the year pay as much as possible on the 0% card. At the end of the year open a new 0% card and transfer the remaining balance from the first 0% card to the new one and close out the first 0% card. If there is room transfer any other card balances and loan balances you can to the 0% card and repeat the process of making as big a payment as possible to the 0% card. Eventually all the cards and loans will be consolidated on to the one 0% card exercising financial discipline all the debts will be paid.
Option two
Again if the person has good credit takes out debt consolidation loan or a home equity line of credit and use the money to pay off loans and credit cards so that there is only one monthly payment for the debts and that payment is less than the several payments made previously. Exercise financial discipline to keep from opening other credit cards or loans and try to pay as much as possible each month on the consolidation loan to get it paid off.
Option three
Use a debt management company to get control of the finances. Debt management companies have programs where a person makes one payment into an account and the company disburses that money to the creditors. The debt management company contacts the creditors and negotiates an agreement with them to accept payments through them often at a reduced interest rate or a payment schedule that is spread out to allow lower payments. The debt management company will require that all credit card and unsecured loans be part of the program. It will collect fees for its service from the payments made to the account. These type programs work because creditors presume that the debtor is on the verge of bankruptcy and that by accepting the program they are more likely to get paid all that is owed.
These three methods work very well to consolidate and pay off debt if financial discipline is used to keep from incurring new debt as the old debts are paid off.