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Second, you may be able to set up a consolidation loan that lets you pay off your debt over a longer time than your current creditors will allow, so you can make smaller payments each month.
That's particularly helpful if you can combine it with a lower interest rate as well. Basically, you borrow a single, lump sum of cash that's used to pay off all your other debts.
There are some situations though, where a HELOC might be a more attractive option.
A HELOC sets a certain amount you can borrow, called a line of credit, and you can draw upon at any time and in any amounts you wish.
Because it's a secured loan, you can get a better interest rate than you generally can on a personal loan or other unsecured loan.
And because it's a type of mortgage, you may be able to deduct the interest payments on your federal tax return.
You can also seek to take out a personal, unsecured loan on your own or try to negotiate some sort of arrangement with your creditors. The simplest, and most straightforward way to consolidate your debts is to simply to take out a new loan from your bank or credit union and use that to pay off the various bills you may have.
You're then left with one monthly bill to pay rather than several.
Of course, this approach requires that you have fairly good credit - if your FICO credit score is in the mid-600s or lower, you may have trouble getting such a loan from a bank or credit union.
There may be other wrinkles involved - for example, some of your creditors may be willing to write off part of your debt in return for an immediate payoff - but the key thing is that you're simplifying your finances by exchanging many smaller debt obligations for a single bill to be paid every month.
What types of debts can be covered by a debt consolidation?
This not only simplifies the payments, but can also provide real debt relief by reducing those payments as well.
A consolidation loan can reduce your monthly debt payments in two ways.