A debt consolidation loan creates a new loan secured by your property and pays off most or all of your debts, saving you money and saving your credit. Lear how, step by step:

Instructions

Step 1:
Add up all of your debts. Include all credit cards and loans.

Step 2:
Check the interest rates you are paying on all of the credit card accounts and loans. (Interest rates on credit cards will generally run from 12 to 21 percent.)

Step 3:
Find a lender. Contact several lenders and compare their loan products. Look in the yellow pages, ask a local real estate agent for a referral, or check the Internet.

Step 4:
Determine which lender has the best debt consolidation loan for you. Loans will vary in length, interest rate, amount loaned and type of interest rate (fixed or adjustable). The interest rate and loan program you qualify for will depend on your credit, income and equity.

Step 5:
Complete a loan application and supply all requested documentation.

Step 6:
Submit copies of all credit card and loan statements that will be paid off to the lender.

Step 7:
Complete the loan process. (This typically takes three to four weeks.)

Tips & Warnings

  • Most likely, your lender will require that your credit cards and loans be paid off through escrow, which means that when the loan closes and you get your new consolidated loan, your old balances will be paid off.
  • The interest paid on loans secured by real property - such as your home - is deductible, as long as the loan balance or combination of loan balances does not exceed the value of the property.
  • A debt consolidation loan should reduce the overall amount of monthly payments and interest you pay.
  • Interest paid on credit card debt or personal loans is not tax deductible.
Source: Ehow.com