Sometimes, if your income has dropped or you are in a situation where you have gotten yourself into too much debt. It is best to seek help managing your debt, or applying for a debt consolidation loan, which can lower your monthly payments and leave you extra money every month to start paying down your principal balance.

You can have financial breathing room if you can consolidate your bills into lower monthly payments. It is a smart thing to do if you are struggling to make your minimum payments.

There are many ways that debt can be consolidated. If you have a home with some equity, you can apply for an equity line of credit which can be used to consolidate your debt. Even if you have no equity in your home, you may be able to qualify for a home loan which will go over amount of equity you have in your home, sometimes up to 125% of your homes value.

To view our list of recommended debt consolidation companies or home equity line of credit sources, visit these pages: Recommended Debt Consolidation Companies and Recommended Home Equity Line of Credit Sources

Retirement Loans

I'm not going to give a lot of detail on this one because I think it is a bad idea and only should be used to save you from bankruptcy. There are too many big negatives other wise to consider this option for debt consolidation. You loss your tax benefits and may have to pay a penalty if this don't go smoothly for you. Not to mention big kicker that if you are borrowing money from yourself that means your money is not working for you but against you. Not only that if you lose your job or quit you most likely have to pay off loan immediately. After you learn a few things about investing you will see quite clearly how this is not such a great option even though it's easiest to get.

Debt Consolidation Loans

Even though they may seem to be best choice or even most logical, it still may not be your best bet. A debt consolidation loan is an unsecured personal loan, and they can be difficult to get if you already have a lot of debt. The bank doesn't like to give you a loan if you monthly payment on your debt not counting your mortgage is more than 15%-25%, depending on your credit, of your gross monthly income (before taxes). The bank feels like you are just going to go and charge back up your balances, which happens all too often. Because of those big negatives going interest rate on these types of loans are about 15% or more. These are definitely not best interest rates compared to other items we discussed so far. However, if you can get a debt consolidation loan with an interest rate better than what you have right now it may be beneficial for you to get one.

Consider a Debt Consolidation Loan if:

You are willing to close your credit card accounts so you don't end up in same trap everyone else does and dig a deeper hole of debt.

The interest rate you will be paying is lower than what you are paying right now on any debts that you would consolidate. Make sure term is not more than 5 years or you could be falling into a different trap altogether and end up paying way to much interest for term of loan.

Don't use a Debt Consolidation Loan if:

the most obvious reason is if interest rate is way too high.

The term of loan has been extended to 10 or 15 years. It will show you a really cheap payment but wait until you add up all money you will be paying back you won't consider it a good deal then.

Counseling Agencies

As ads on late night TV and cable claim to be able to consolidate your debt i.e. "bills", into one small monthly payment "no matter what your credit history". Every once in a while you these ads are for a home equity loan, but more recently they have leaned to more often promoting credit counseling agencies.

Counseling agencies go to lender and negotiate a lower interest and/or fee. After that you end up making one monthly payment to counseling agency, Which then pays your creditors. Their fee is lumped into monthly payment. A lot of times you could have done much better of for yourself if you would have dealt with creditors personally. This is not really a debt consolidation loan since you don't really refinance anything, it more like debt restructuring. If you can stick with program you can be out of debt in 3-5 years.

The biggest fear people have when dealing with counseling agencies is that agencies will ruin their credit. Quite honestly if you are already behind on your bills and haven't been able to put a dent in them, a counseling agency debt consolidation program is not going to make your credit much worse than it already is. It will make your score drop a bit, but when you look at benefit of being debt free a few years down line it's a lot better alternative to declaring bankruptcy.

Consider debt consolidation with a counseling agency if:

You are falling way behind on your bills and there is not another alternative. These kinds of counseling programs are for people who are having problems paying their bills on time, not for people who want a lower interest rate.

Most of your debt is not a secured loan. In other words a car loan, home loan, or a student loan. Since there is collateral involved counseling agency has a harder time renegotiating terms.

Don't do debt consolidation with a counseling agency if:

You know yourself better than anyone else if you can't stick to a little program for a week or a few months by all means don't try and do this program that is going to take a few years to complete.

You haven't done you due diligence and thoroughly checked out company. Since they are acting as a mediator and you are paying them they can screw things up really quickly and you will still be held responsible (it really does happen check out news release section) Make sure you choose an agency that will give you support you need for long haul...3-5 years.

Protect Yourself

Be wary of credit counseling organizations that:

-charge high up-front or monthly fees for enrolling in credit counseling or a Debt Management Plan.

-pressure you to make "voluntary contributions," another name for fees.

-won't send you free information about services they provide without requiring you to provide personal financial information, such as credit card account numbers, and balances. -try to enroll you in a Debt Managment Program without spending time reviewing your financial situation.

-offer to enroll you in a Debt Managment Program without teaching you budgeting and money management skills. -demand that you make payments into a Debt Managment Program before your creditors have accepted you into program.

Creative Alternatives to Debt Consolidation

Now it's time to start to use that space between your ears, your brain. Just because none of these options work for you doesn't mean that you should give up! You have made it this far.

Borrow against cash value of your life insurance policy. If you've built up a cash value in your policy, you should be able to tap it at a low rate. Best of all, it doesn't have to be repaid. The downside is that your loan will decrease your death benefit, so make sure you have enough coverage to protect your heirs. (You may want to buy a supplemental term policy.)

Make it easy for yourself call all your credit card companies and get them to change due dates that are more convenient for you so they fall all on same day right around payday. This way you sit down once or twice a month to do your bills instead of 10 different days.

Think of Debt Consolidation as one of many tools in you arsenal to get yourself debt free

Mical Johnson is affiliated with Rock Financial, Inc., a Licensed

Correspondent Mortgage Lender, Florida Department of Finance. Mr.

Johnson hosts Home Buyer’s Seminars which are open to the public each

month in the TampaBay area in Florida. To obtain a free copy of Mr.