If you have too much consumer debt, you probably have looked into debt consolidation. There are thousands of debt consolidation companies out there promising to wipe out your debt overnight but reality suggests otherwise. Most of these companies promise “Easy Monthly Payment Plans” with reduce payments and lower interest rates.

In reality, almost all debt consolidators build in a fee as part of the monthly payment you make to them. It’s usually around 10% of the payment (i.e. about $100 on a $1,000 monthly payment). They pass along your payments to the creditor and get back a 10% to 15% slice that a creditor is only too happy to rebate to the consolidator.

Is it worth paying someone else to do what you can do on your own, i.e. negotiate lower interest rates and stretch out your repayment schedule and pay off the highest-interest debts first? Can you manage your own debt?

Simple answers is that it depends on your personal circumstances. Regardless of your own situation, there are some good options that are available to most people. Let’s look at some of the options that are available to you to do your own debt management.

Home Equity Line of Credit

If you’re a homeowner, you may be able to use it to tackle your unsecured debt such as credit card debt. More and more lenders are offering home equity lines of credit. By using the equity in your home, you may qualify for a sizable amount of credit, available for use when and how you please, at an interest that is relatively low as compared to usual credit card interest rates. Furthermore, under the tax law-depending on your specific situation-you may be allowed to deduct the interest because the debt is secured by your home. If you are in the market for credit, a home equity plan may be right for you. Or perhaps another form of credit would be better. Before making a decision, you should weigh carefully the costs of a home equity line against the benefits. Shop for the credit terms that best meet your borrowing needs without posing undue financial risk. And remember, failure to repay the amounts you’ve borrowed, plus interest, could mean the loss of your.

Remember, a Home equity loan is a form of revolving credit in which your home serves as collateral. Because the home is likely to be your largest asset, many homeowners use their credit lines only for major items such as education, home improvements, or medical bills and not for day-to-day expenses. However, credit card debt is becoming the most common reason why people are taking home equity loans.

How much is available to you will depend on your individual situation. Here is a good example on how much credit can be available to you from your home equity.

Appraised Value of Your Home = $200,000
Credit Limit set by most lender = 75%
Equity available for Consideration = $200,000 X 75% = $150,000
Outstanding Mortgage Balance = $80,000
Net Equity for Loan Consideration = $150,000 = $80,000 = $70,000
Potential Home Equity Line of Credit = $70,000

As you can see there is a significant amount of money available from home equity loan. Important thing to remember is to use it wisely. You may not have another option to pay your credit cards but you still have your home. So be very careful if you plan to use it for credit card and use it only if you’re willing to make some serious changes in your financial life.

Line of Credit or Unsecured Loan

Is you can tell, this is simple line of credit that can be offered to you if you have decent credit. Important thing about this is that it is unsecured and lender is trusting you that you will pay it back. Interest rates on Line of Credit are fairly high but not as high as some of the credit card rates. For example, if you’re struggling with a credit card debt at 23%, it makes sense to apply and use a line of credit at 10% or 14% to pay the card off. Line of credit loans are just like any unsecured loan that you can use anywhere and in any manner you want. Once a charges is posted to your account, interest charges will apply and there is no grace period like a credit card. Also, this interest is not tax deductible since it is unsecured revolving credit. This is a good option for people who don’t own a home and can’t apply for a home equity line of credit.

Zero Percent Credit Cards

Zero percent is usually an introductory rate that issuers can offer to people with decent credit. It is always offered for a fixed period and you may have to sign up for a new credit card in order to get it. Length of time can vary between 6 months to 18 months. This could help you pay down your high interest credit card fast and save money in long run. One of the most important thing to remember with balance transfer credit cards is that you have to either pay your balance before introductory period expires or move your balance again. If you are unable to move or pay off your balance when introductory rate expires, you may end up paying a interest rate that could even be higher than the original card you transferred your balance from. You will also pay a balance transfer fee(usually 4% of the amount) up front to take advantage of these offers. You may be able to negotiate with a lender to waive balance transfer fees in case of a new card. The most important thing here is fiscal discipline. Balance transfer can become a habit and potential financial trap don the road if you don’t use it to pay off your balances.

Debt Consolidation Service

This is one of the last resorts before you may have to file for bankruptcy. Interest rates are not low but still lower than your credit card. There are numerous debt consolidation and credit counseling companies that could help you secure a debt consolidation loan. You will also pay fees and service charges in addition to interest and principal. While there aren’t many good things about a debt consolidation, it can help you get better organized since it can consolidate multiple credit card balances into one big loan with a fixed interest rate. You will make one payment every month and debt consolidation company will manage the payments to your creditors. They will also work with your creditors to negotiate lower interest rates or sometime eliminate interest rates and penalties. A debt consolidation loan is only good if you’re going to show fiscal responsibility and would not run up credit card debt again.