Is your debt becoming more difficult to manage and pay off?  A debt consolidation loan can help you gain control of your finances, and start paying off creditors.  Debt consolidation is one of the first options to consider before filing for bankruptcy.  In many Chapter 13 bankruptcy cases, debt consolidation is used to help pay off creditors and re-establish solid financial management.

The first step in debt consolidation is to calculate everything you currently owe.   Make a list of all your debts, and determine what you’re paying on these accounts each month.  The next step is to shop for the best type of debt consolidation loan.  There are several types of debt consolidation loans to consider.  There are home equity lines, and lines of credit, cash out refinancing, and a personal debt consolidation loan.  Personal debt consolidation loans are a good choice if you don’t own a home, or you have no equity in your home.  The interest rates on personal debt consolidation loans are higher than home equity loans, but typically lower than credit card rates.

When you’re shopping for debt consolidation loans, don’t forget to consider all costs, including upfront fees and points, as well as interest rates.  Use the loan’s APR as a comparison tool to determine which loan offers you the best deal.  Lenders are required by law to publish the APR, which includes the interest rate, and all fees and points.

The third step in debt consolidation is to commit to a timeline for repayment.  Personal debt consolidation loans and home equity lines of credit have a fixed term, so you’ll know exactly how long the repayment period is.  After you’ve chosen a debt consolidation loan, and established a timeline for repayment, the hard part begins.  The most important step in debt consolidation is to control your spending.  After you have your debt under control, it’s important to be disciplined and stick to the repayment plan.  Otherwise, you’ll end up in even more debt.