It may sound like a complicated solution to you, but it is really an easy and simple process. This kind of a process has been specifically developed for people who have too many bills to pay each month and are feeling overwhelmed by them. The solution is to merge them all together at a lower interest rate in a debt consolidation loan.

Credit card debt, as you are probably well aware, has interest rates of 20% or so. Some department store cards may have interest rates that are even worse. If the bulk of your debt is high interest rate credit and department store debt, you may find that a debt consolidation loan is just right for you.

Lowering the interest rate on your overall debt will automatically lower how much you have to pay each month. You will better be able to make your payments each month. You would pay off all of your current creditors, so that debt would be satisfied and improve your credit rating.

Once you have secured a debt consolidation loan, you will want to make sure you now keep your debt manageable. Bad management of your finances is probably what got you into trouble in the first place, so you have to set that right. The first step is to examine all of your expenses and see what you can eliminate to save money. You'd be surprised at how many non-essentials can be eliminated to save money.

Putting all of this on paper is a eye-opening experience. You can make decisions in a much better way once you know exactly how much you are spending on what.

Now you may want to understand exactly how a debt consolidation loan works. The basic idea is to replace all of your high interest rate debt with one lower interest rate debt. Debt is comprised of two things: the principal amount of the debt, that is the value of the item you purchased, or the money you received, and the interest on the debt, that is the fee you pay to use the debtor's money. Many credit companies only ask you to pay the minimum, which is mostly the interest payment, so you never pay down the principal, and continue to owe them money. You may even by only paying interest on the interest, and never making a dent in the principal. With a debt consolidation loan, your interest rate is lower and part of the payment is then applied to the principal.

Now that you have lower payments, you will start to save some money. It is important to take advantage of this and not just spend whatever savings you have made. You may have had a hard time saving before, but now you can take what you save on high interest rate debt and put it into a savings account. This will help you in the future to avoid using high interest credit card debt.

A final piece of advice about staying out of debt is to avoid any more loans. Once you have cleaned up al but your debt consolidation loan, you may feel you have a clan slate and you can borrow now at better rates. Even if you can, you do not want to start that cycle again, so stay away from more debt.