Five Debt Consolidation Steps to Make Life Easier

Debt consolidation can be a powerful tool for getting control of your finances, but only if you have a long-term plan and the discipline to stick with it. Perhaps the best news about debt consolidation is that recent lows in interest rates offer a rare opportunity to really save some money. If you want to get started, here are five steps that can help make debt consolidation work for you.

1. Identify your high-cost debt. Identify all your sources of debt--mortgages, car loans, student loans, credit cards, etc. Now, list the interest rate you are paying on each one. Knowing the cost of your existing debt will give you a yardstick for measuring how much you might be able to save with a debt consolidation loan.
2. Shop for lower rates. Next, shop for lower rates. Mortgage interest rates recently reached an all-time low, so there is a golden opportunity to save money if you can consolidate debt by refinancing your mortgage. However, if you are not able to secure a new loan at this time, don't despair. There are other debt consolidation steps you can take.
3. Prioritize debt payments by cost. Take that list of current debts and rank them from the highest to lowest interest rates. The debts at the top of the list are costing you the most and should be the first priority for repayment. If you are able to access some home equity by refinancing your mortgage, use it to pay off these debts first. If you are not able to refinance at this time, then target those highest-cost debts for the biggest monthly payments. This way, you will see your debt burden gradually shift more toward lower-cost sources of debt.
4. Budget to stay within your income. It's important to understand that the purpose of debt consolidation is not simply to free up credit balances so you can run up more debt. Once you've identified your payments, formulate a strict household budget to meet those payments without running up new debt.
5. Improve your credit rating and shop for rates again. Once you've started to make some progress, check back to shop for rates again. An improving credit history might make you eligible for loans or lower interest rates that were not available to you before.

Each of these debt consolidation steps will help you work toward a life of manageable debt, and the savings available from today's low interest rates should be a strong incentive to get started. Shop for rates on this Web site to see how much you stand to gain by getting started.