How to Consolidate Your Secured Debts with a Secured Loan

If you find yourself struggling to keep up with all the payments you have to make each month to different agencies, you are probably feeling pretty overwhelmed. It's frustrating to get dates confused and end up having to pay a late fee just because of an oversight. One easy way to win this battle is by consolidating all of your secured debt into one loan. This allows for one easy monthly payment that will make financial management much easier and possibly even less expensive.

Step 1

Get a copy of your credit report. You can easily obtain this online through Equifax or Experian (see Resources section). Review your credit history to make sure there are no mistakes. If there are mistakes, you will need to get them cleared up before applying for a debt consolidation loan.

Step 2

Choose your collateral or security to use against the loan. Some choices you may consider are your home, automobile, a valuable piece of jewelry or saving account. Using your home may be the best choice as it is the most valuable and will offer you a higher loan with a lower interest rate.

Step 3

Sort through your debts and decide which debts you want to include in the consolidation. It is best if you can include all of them, but if you have many outstanding debts it may not be possible. If you have to choose which debts to include, be sure to choose the ones with the highest interest rates. These debts need to be paid off first so you don't spend all your money in interest and fees.

Step 4

Compare loan rates. One great site to compare rates is Bankrate (see Resources section). This free site enables you to input your information and receive rate quotes for banks and financial institutions in your area. This way, you'll be able to compare rates to make sure that you are getting a good deal before you sign up.

Step 5

Apply for a home equity loan. Be sure to have all the proper documentation when preparing to apply. You will most likely need a letter of employment, proof of income and at least two months worth of statements for each debt you are consolidating. Lenders will compare your debt-to-income ratio to determine how much you can afford to pay each month. To show proof of income you can use your W-2, past tax returns or paycheck stubs.

Step 6

Beware of the risks of a consolidation loan. It's great not having to juggle payments to various lenders, but you must make sure you can make the monthly payment on time. With this being a secured loan, you run the risk of losing your home or other collateral. Cut up those plastic demons if necessary to keep you from running your balance back up. The purpose of consolidation is to get your debt in check and improve your credit.