Another way to escape debt is a debt consolidation loan.  With such loans, you consolidate several unsecured debts into one monthly payment that is less, with lower interest, than the payments on your current debts.


One method is to transfer all credit card balances to a card with a lower interest rate.  There are several things to watch out for when transferring your balance:
1.  Low teaser rates that expire after only a few months and then jump to 18% or more.  Some cards will retain their introductory rates for six to twelve months.
2.  Higher interest rates on transfers from other credit cards.  Transferring debts from cards with higher rates is the main reason for consolidating them on a lower interest card.  Some cards limit the lower rates to new purchases.
3.  Transfer fees.  These fees will offset some of the advantages gained by paying lower interest rates.

There is a list of low-rate cards at Bank Rate Monitor's Web site.


A home equity loan or credit line is another option.  Home equity loans allow you to tap into the money you have invested in your house.  Homeowners must have 20% equity before they qualify for this option.

An important thing to note with a home equity loan or credit line:  You stand to lose your house if you are unable to make a payment.


Your local banks, credit unions, and finance companies also offer consolidation loans specifically designed for people to pay off bills.

Make sure the loan is working in your favor.  Sometimes consolidation loans offer an attractive lower monthly payment than what you were originally paying simply because they stretch the payback period over a longer period of time.  If this is the case you could end up paying more in interest than with your original debts.

For a loan consolidation to work you should pay at least as much each month as you were paying previously on all your bills.  With a lower interest rate, more of your payment will go to pay off equity and your bills will be paid off faster.