As long as consumerism flourishes most of us will be tempted to overspend thus creating a financial bind. While some people do manage to get themselves out of debt others, for a number of reasons, including job loss, divorce or hospitalization cannot. In these instances bankruptcy may seem the only way out, but for homeowners there are other options. Debt consolidation is one such option.

How does debt consolidation work?

Homeowners may apply for home equity loans that can be used to pay down debts. Your credit union is the best place to turn if you are considering such a loan. Depending on the strength of your credit and other things such as the current value of your home your credit union will give you a lump sum that you can then use to repay your creditors. With most of your debts now paid you will make one payment, usually at significant monthly savings, to the credit union.

If you choose to use a home equity loan to repay your debts be sure that you are ready to make significant changes to your lifestyle, spending and saving habits. Your loan is secured by your home and you risk foreclosure if you default on your loan payments.

It is a good idea to make a budget and have a plan for how the loan will be repaid. If you run into trouble you must maintain contact with your lender so that you can make arrangements that are acceptable for all parties concerned.

Even if you are not a homeowner there are options Consider contacting a reputable debt help agency. These companies will contact all of your open accounts and negotiate a payment plan with lower interest or a lower balance. Once this happens, they will collect the payment from you and pay off that bill, and then move to the next one, doing the same thing with all of the open accounts. They accept the payments on the accounts, with their fees added onto the payment. When research debt help agencies be sure to choose a reputable agency and read the contract in its entirety. Many debt help agencies are unscrupulous and charge exorbitant fees that serve only to escalate your debt load. A good service can help lower monthly payments, lower interest rates, and can help in avoiding accounts being turned over to collection companies. How does this look on a credit report?

The consolidation plan will show up on your credit report, but most companies consider voluntary enrollment in a debt consolidation more favorably than non payment or bankruptcy. With time negative reports will have less impact on your score.

Before you sign on for a debt consolidation plan be sure that you can manage the payments. Take the time to review all expenses and sources of income before you commit to a monthly payment amount. If you do not follow through with the plan to repay your bills your creditors will not keep any reduced interest arrangements and will be less likely to work with you on any future arrangements. Additionally, the accounts will go back into collection, and the debt consolidation company may attempt to collect unpaid fees.

Nicole Soltau is the President and Founder of http://CreditUnionRate.com - The Leading Credit Union Directory Search, Find, Join.