- 1). Consider a non-profit credit counseling service. Credit counseling can help you re-evaluate your spending and saving. They can also help you create a debt management plan (DMP). This plan is a form of debt consolidation. You make one monthly lump sum payment directly to the counselor each month. They distribute your money to the creditors to cover the debt owed for the month. An advantage is that you often pay a reduced interest rate. This allows you the capability to get out of debt faster.
- 2). Take out a debt consolidation loan. If you want to take out a new loan to pay off your existing debts, consider this option. You are able to pay off all creditors and are left with one monthly payment. You avoid late fees and high interest rates from multiple creditors. Your credit must be good enough to qualify for the loan. When deciding if a debt consolidation loan is right for you, remember to factor in the length of term and interest rate of the loan. This will add up over time. If you are looking for a quick solution to avoid damaging your credit, then contact a lender to discuss a debt consolidation loan.
- 3). Negotiate with the creditors. Debt settlement is a way to negotiate with the creditors. If you have defaulted on loan or credit card payments, the lender usually wants to collect their money any way possible. The creditors are often willing to offer reduced pay-offs. This is a good option for accounts that are no longer revolving. If the delinquent accounts have already begun bringing down your credit score, consider contacting a debt settlement company. Instead of paying the monthly payment to the creditor, you pay it to the settlement company. They establish a separate savings account to allow you to accumulated enough money to make a settlement offer. The company will negotiate with the creditor for you. If you prefer not to use a debt settlement company, try negotiating with creditors on your own. Be aware that when you stop paying your creditors, you are subject to legal action.
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