Take some time off your day, and figure out where you’re spending the biggest chunk of your money. Lets face it: the odds of you being able to cut down on spending are far greater than the ones of you getting a sudden pay rise.

If you own multiple credit cards, try to concentrate your debt on one of them – preferably, the one with the lowest interest rate. If that one doesn’t have enough room, shift the remainder to the one with the second-lowest interest, and so on.

Take a look at your monthly bills. The electrical, heating and water bills can be hard to lower, but there are some others that you may be able to save money on. Your internet bill, for instance. Call your internet service provider (it’s usually a free call) and ask for a better deal. Do the same with your phone and your cable television provider. At the end of the month, you can be saving enough money to put toward your credit card debt.

Debt consolidation involves the taking of one big loan to pay off all your outstanding bills by putting up an asset as collateral. This asset generally is a house you own.

The collateral you offer (such as a house) can be sold or disposed off by the creditor to get his money back. So, the risk factor for your creditors reduces, allowing them to reduce the interest rates for you. This means you have a lesser amount to pay and so you can clear it off faster.

This method is generally recommended for clearing off outstanding credit card bills as the rate of interest charged by credit card companies is very, very high.

The type of loan you use to pay off these debts determines how much the interest rate will be reduced. If you get a secured loan by mortgaging your house, you could avail a greater reduction. If you take a personal loan to do so, the reduction is lesser.

Note that if your house is already mortgaged you can take a second mortgage on it.

With a secured loan, the lender will require some type of collateral, generally a home or property. While this type of loan is usually easier to obtain, if something happens and you can’t keep the payments paid, you’ll lose your home. Secured loans are high risk unless you’re absolutely sure that you won’t have any problems in making all the payments.

Unsecured loans on the other hand, don’t require any collateral. They are based on your credit history and on the institutions belief that you are financially able to repay the loan. While this type of loan might be a little harder to get, they don’t carry the risk of losing your home or property.

A debt consolidation loan is essentially a bail out loan. But, like any other loan, it’s a legally binding agreement between you and the financial institution and it should not be taken for granted. Before you get a debt consolidation loan, you should make sure that you’re going to be able to meet your obligation and repay the loan.