For a person in debt, making umpteen payments to credit card companies, loan installments, mortgages every month is not new. It takes an enormous amount of energy to keep making these payments.

Consolidating the entire six to seven loans into one loan can make things easy. There are many benefits to combining the loans and making a single monthly payment with reducing rate of interest and collection calls. All this is in order to get out of debt.

A few questions you need to ask yourself before considering debt consolidation options are –

• How much do I owe?
• It is not uncommon to lose count of what is the exact total amount you owe.

Once you have answered take the next step look for debt consolidation options, which are listed below:

Loan

Get a loan and pay off all your debt, only make one monthly payment to your new lender.

You may need to turn to a Peer to Peer or social lending service. A friend or relative may give you the consolidation loan, but you must take the initiative to write a loan agreement and take it seriously. Otherwise, be straight and explain your situation and ask for a gift.

The downside is if you get a debt consolidation loan at a decent rate, you may fall into the trap of using credit cards again if you don’t stick with a plan, the consolidation loan will then just become another monthly payment.

Counseling

If you sign up for a Debt Management Program with a credit counseling agency, you will make a monthly payment to the counseling agency which in turn pay your creditors. You will be out of debt in five years.

Downside – You will have to close all your credit cards, which will affect your credit scores. The most significant challenge is to stick with the payment schedule each month.

Retirement Plans

Borrow the money you need from your 401(k), 403(b) or pension plan. (You cannot borrow on IRA.) No credit check is required. You pay it back to your retirement account. The interest you pay to yourself.

The total amount of the monthly payments is over a period of 60 months (the maximum term for these loans) may be higher than the amount you were paying on your credit cards.

Other alternatives

DIY Consolidation

The credit card statements list an amount you must pay each month to pay off the balance off in three years. Set up automatic withdrawals from your bank account; put away your credit cards, so you don’t use them. Any extra money you come put it in your debt with the high interest. You will be free of debt in three years or less.

Bankruptcy

It is a drastic step, but sometimes necessary. Don’t wait to drain your savings, lose your house talk with a bankruptcy attorney.

Listed below are the best debt consolidation loan companies.

• Lending Club: It is one of the largest peer-to-peer lenders. Personal loans through Lending Club come from $1,000 to $40,000 at APR ranging from 5.99% to 35.89%. Best APR is given to those with excellent credit. It is easy to find the rates and fees, a description of the lending process, and streamlined rates. They require that you have a minimum credit score of 640 and they are stricter about giving a loan than other companies. They are also strict about debt-to-income ratio and rely more on credit history. They charge a $15 as check-processing fee every time you pay with a check. The loan has to be paid within 36 to 60 months; the loan is cleared in a week or more, they are very picky about borrowers and charge a check fee.
• PersonalLoans.com: It has a connection with lenders in all 50 states. APRs range from 5% to 36% for a loan up to $35,000. Several types of loans are available: peer-to-peer, bank loans, and installment loans. The site is very informative but is a referral site. This makes it difficult to know what APR you will be offered, what fees will come with your loan and crucial information that is easy to understand with a lender.
• Avant: It offers loans at a slightly lower credit scores than Lending Club. It offers loans from its lending platform. The best debt consolidation loans have low fees, competitive interest rates, and flexible terms.

Tips

• Avoiding Scams: Always be on the lookout for dishonest companies that target people looking for debt relief, including personal loans. Keep in mind:
• You do not need an intermediary. To consolidate, you don’t need to negotiate with your creditors. You contact them first; shady dealers will hound potential buyers.
• Do not pay any fees up front: No legitimate lender will guarantee that you will qualify for a personal loan without knowing your income, credit score, and other personal information.
• Legitimate lenders will not object if you search for a better deal or to borrow more than you can afford.
• Read the reviews and also look up Better Business Bureau rating.