Debt consolidation is acquiring a new loan and using the proceeds to pay off all the other debts. The new loan is usually secured against an asset, in most cases your home. The new loan is at a mortgage rate of interest which is much lower than credit card interest rates and for a longer term so your payment can be much lower. The risk is if you default on the new loan you can lose your home. Another risk is that if you don’t close the accounts that have been paid off you may be tempted to build up a debt balance again.

You’ve been bombarded with credit card offers of all types since you became an adult, so it’s no surprise that you’re now thousands of dollars in debt. This massive debt, combined with the occasional missed payment, has caused your credit score to sink so low that it’s considered poor. With a poor credit score, you’re bound to have issues with getting car loans, mortgages and other loans you may need. Fortunately, it’s rather easy to get rid of poor credit—but only if you use some smart debt management. Reduce credit card debt with these five rules.

The five rules of debt management.
You might have seen all the commercials on TV advertising companies that claim to get rid of your debt right away. This is a huge lie, as getting rid of debt is not an overnight process. Rather, it takes time, and the use of a debt management plan, in order to eliminate debt and raise credit scores. By following the five rules of debt management below, you’ll be able to come up with a debt management plan that works for you.

Reduce Credit Card Debt Rule #1: Cut Up Those Cards
If you want to get out of debt, you have to stop spending. For some, it’s as simple as not touching the cards, but for others, it’s a good idea to take the cards out of the wallet and throw them in a drawer, or cut them up. Any good debt management plan involves ceasing to use the credit cards, so before you do anything else, do that.

Reduce Credit Card Debt Rule #2: Determine Your Total Debt
It’s amazing, but many people do not know what their total debt is. If you’re clueless in this regard, it’s time to take a little time to figure it out. Take out all those credit card statements and add up the balances. When looking at them, also look closely at the interest rates and minimum payments—and write those down as well. You’ll be using it when establishing the rest of your plan.

Debt Counseling is provided by for profit and nonprofit agencies. You provide all your financial information including income, assets, debts and mortgages to the agency. They determine what you can pay and negotiate with the lenders to a revised repayment schedule. The interest rate is sometimes lowered. You pay the total of your debts over a three to five year period. Sometimes the agency will get the lenders to accept less than the total amount due, forgive fees and waive any new fees.