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It does not seem so long ago that anyone could borrow as much money as they needed. Lenders had lowered their standards and were giving money to everyone who applied regardless of their ability to pay it back. It caused many people to face some difficult decisions about how to deal with their debt. Some lost their homes and other assets when they gave up trying to pay back what they owed. Other people found a different way to pay the money they owed back. One of the strategies that people used back then and are still using now is a debt consolidation loan. This loan would allow an individual to take all of the debt that they had and combine it into one loan. The monthly payment on that one loan could be less than what they paid for all of the separate loans before. It gave people a way to get out of debt and could be an effective tool when it is used properly. If you have a lot of debt and want to know how to consolidate your debt, you need to take a few basic steps. List all of your debt The first step is to figure out how much you owe and to whom you owe it. When you make this list include the types of loans that are owed. Make sure to note if it is a secured loan such as a car loan or an unsecured debt such as a credit card. You also need to include the interest rates of the loans, the monthly payments on the loans and the length of the loans. Once you have compiled all of this information you can start to determine are debt consolidation loans a good idea for you. Prioritize your debt If you take your list of debts, you can use this list to decide what loans need to be paid as soon as possible. High interest credit card debts may be more important to pay off than the long term low interest mortgage you have. This step will help you figure out what loans you need to pay off first and which loans are not as important to pay off with a debt consolidation loan. Find a lender Once you have decided what debts would be a good candidate for debt consolidation, you need to find a lender willing to give you the money you need. There are different lenders that you can choose from. Some people use the equity they have in their home to borrow enough money to pay off the debts that are dragging them down. Others find a lender who will loan them the money without any type of collateral. Before you look for a lender, check your credit score. If you do not have good credit, it may be more difficult to find a lender that offers you the terms that will make debt consolidation worthwhile. The idea is to save money, but a bad credit history could prevent that from happening. If you do not know what is a bad credit score, ask a financial professional for help. They can not only explain what a bad score is, they can tell you the steps to take to improve your score. Once you have found a lender willing to give you a debt consolidation loan, you need to take the next step in how to consolidate your debt. Take the money you receive and the list of debts that you have created and pay off everything you can. Do not use the money you get from the loan to do anything else. It will only create more problems. A debt consolidation loan is not for everyone. You will have to decide does debt consolidation work for you. If you take the time to follow the right steps, you can determine if this type of loan will actually help you. Debt is a burden that you do not have to deal with if you manage your money responsibly and take your time to make the right decisions about how to handle any debt you have. Amy Johnson is an active blogger who is fond of writing articles on Bad Credit Loans to encourage people to manage and protect their credit. Follow her on Twitter to know more on how to deal with a mountain of debt.
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