Another choice for someone is to seek a debt consolidation loan. A consolidation loan is used to pay off all of an individual’s creditors. A consumer simply borrows the amount of money that they owe to their various creditors, pays them off at once, and makes a monthly payment back to the bank.

There are several drawbacks associated with these types of loans. Most importantly, a person is risking their assets in exchange for the lower rate. It’s exchanges unsecured debt for secured debt. Where a credit card company could harass, sue, and potentially garnish the wages of a person who can no longer pay, they are unable to seize any assets. If a person defaults on a consolidation loan, he could lose his home.

These types of loans can be difficult to receive with a low credit rating.

This can be a viable choice for people who own their home and have very steady income, as these loans are usually home equity loans. The rate on a home equity loan is usually much lower than a credit card, and can be paid off more quickly with the same monthly payment.