There are two types of debt consolidation loans. The first is the home equity loan. This means that you take out a second, third, or even fourth loan on your home. A home equity loan generally offers better terms than does an unsecured debt consolidation loan.

But these days, home equity loans are hard to get. Not only have the credit markets dried up, banks are also being more discerning about how the loan against homes. It used to be that you could get 125 percent of the value of your home in loans. Today, banks often don’t want to lend more than 80 percent.

And, because the home markets have declined, you may be in a situation where you already owe more than the home is worth. That means that you’re looking at an unsecured debt consolidation loan to take care of your debts.

An unsecured debt consolidation loan will affect your credit. At the very beginning, your credit scores may dip as you pay off and close accounts and receive a new high balance loan. But, if you make the payments on your consolidation loan faithfully, you should see an overall rise in your credit score within six months. The increase could be considerable.

There are two ways to obtain an unsecured consolidation loan. The first is to look at debt consolidation loans through traditional lenders. You can search the internet for free debt consolidation loans which will give you a number of quotes at one time, or you can go into the bank where you do business and ask to speak to a representative about a signature loan for the purpose of debt consolidation.

The second way is to work with a debt consolidation company directly. They will arrange to have all of your debts paid off. You will then make one payment to the company per month. There are non-profit and for profit debt consolidation companies out there. Both have merits. However, there are some unscrupulous for profit debt consolidation companies, so do your homework before signing any papers.

Because the loan is unsecured, you do not put up any collateral. This means the loan can be received fairly quickly as the bank does not have to value any assets.

Traditional banks will want to do a credit check before they lend you an unsecured debt consolidation loan. If you have late payments on your multiple debts, this can be problematic.

Debt consolidation companies, on the other hand, are used to seeing people in your financial situation, and have plans and policies for almost every person. You should contact a debt consolidation company as one of your options when trying to secure an unsecured debt consolidation loan.

There are four ways to go about consolidating credit card debt.

1. Take out a home equity loan. A home equity loan is a second, third, or even fourth against the value of your home. You pay off all of your credit cards and secondary debt and make one payment to the bank. There are a number of advantages to a home equity loan to go about consolidating credit card debt. For one thing, home equity loans are about the lowest interest rate loans you can find. Another reason is that if you have equity in your home, these are fairly easy to get. But, be forewarned that if you fail to pay the debt in full each month, you could risk placing your entire home in jeopardy of foreclosure.

2. Take out a personal, or signature loan. A debt consolidation loan is often available from your bank or from a lender affiliated with debt consolidation quotes that you can get for free online. Again, you will pay off all of your high interest smaller loans and make one payment to the bank. While the debt consolidation loan will have a lower interest rate than your high interest credit cards, it will not be as low as a home equity loan. This is because there are no assets backing up the loan. You can also discharge a personal loan in bankruptcy, something you can’t do with a home equity loan.

3. Secure a credit card with a large balance. If you have several small credit card bills, you can sometimes get one low interest credit card and transfer all of the balances to it. Be sure that you close out all of the small cards or else you may be tempted to use them and then have twice as much debt. If you have decent credit, you may be able to get a credit card with a large credit limit. But, make sure that the new card has a lower interest rate than all of the small cards because that is the whole point of consolidating credit card debt.

4. If you are unable to go about consolidating credit card debt by working with lenders or credit card companies directly, go to a debt consolidation firm. These firms work with the credit card companies themselves. Often, they are able to negotiate lower interest rates or even get the principle reduced. Then, instead of paying multiple bills each month, you will make one payment to the debt consolidation company. Keep in mind that there are for profit and not for profit debt consolidation companies. Some of the for profit companies have turned out to be very disreputable. So, do your due diligence before singing up.

You have many options for consolidating credit card debt. You want to choose the one that gives you the best combination of lowest payments per month and lowest overall interest payments over the life of the loan.

Keep that image in your head of what becoming debt free would mean, because you are about to make some hard choices. If you don’t keep the freedom image, you may want to give up when it seems that you are the only person you know who is not going on a cruise this year or who doesn’t upgrade to a 60 inch plasma television.

We live in a society where we buy now and pay later. Unfortunately, that has lead to a situation where everyone is in debt. The recent constriction in the credit markets has meant that people who used to be able to get easy credit are having to tighten their budgets.

Becoming debt free starts with taking stock of what you have and what you owe. Your first order of business is to start living within your means.

You must make the minimum payments on your debts as well as provide food, shelter, and clothing for your family. There are other essentials such as transportation and utilities.

But within each of these categories, there are ways to cut the fat out of your budget. For instance, most families could halve their food budget just by cutting out the restaurant meals and pre-packaged foods at the grocery store. Sure, this means actually cooking homemade meals. But I’ll bet you find that the meals you make at home are far more nutritious than the ones you’ve been eating. And, they’ll keep you within your budget too.

While cell phones are certainly a necessity today, having the package with unlimited calling and texts is not. Having cell phones for emergencies and quick calls is one thing, having cell phones as an appendage to the ear is another.

Even utility bills can be slashed if you are willing to open the windows, use fans, and cut the air conditioning in the summer and use space heaters and wear sweaters instead of central heat in the winter. These choices are smarter for the environment as well.

Will you feel some measure of deprivation while becoming debt free? That is inevitable. Your kids may not quickly adjust to their new, more Spartan lifestyle. They may not understand why you’re no longer handing them $20 when they want it.

But, over time, you can teach them good habits about money. You can show them with your own actions that being financially responsible is emotionally a healthier choice. By compensating for “things” with quality time, you will win them over.

So, keep in mind what becoming debt free really means to you. It will make the hard choices you are about to make seem worth it all.

Being debt free today means no mortgage, no auto loans, and no credit card bills. It means that everything you earn goes into your pocket for spending this month or for saving for the future.

In today’s consumer culture, that doesn’t seem likely for most people. In fact, most Americans dig themselves deeper in debt each and every month.

But, if the current economic slowdown has shown us anything, it is that we have to become more responsible consumers.

People bought bigger houses than they could afford assuming that the housing market would rise forever. They thought that when their interest only loans ran out and they would have to pay the principal, they would just refinance at a new, lower rate. They were wrong, and they have suffered foreclosures in massive numbers as a result.

But it is not just the home market where irrational exuberance took hold. People went out and charged up debts like there was no tomorrow. In fact, after the 9/11 attacks, President Bush even encouraged people to go out and spend to show that the terrorists couldn’t damage our economy.

He passed stimulus bills which just put the debt burden on our children. He gave us money today which our children and grandchildren will pay back with interest.

Perhaps that was necessary given the environment we were in, but now it is time to look at other options. In short, we should look at being debt free today.

The first thing you should do is make a budget on two pieces of paper. The first page “A” should include all of the things you have to pay. Be judicious on this page. The “A” page should include non-negotiable items such as your house payment, credit card loans, car loans, etc.

You will also include the things you absolutely need on the “A” page. For instance, you have to have food to live. But, how much do you have to spend on food? In reality, you probably can find ways to feed your family on a lot less money. Eating out is not an “A” item. Steaks are not an “A” item.

Clothing is another area where you can save money. While you need basic clothing, thrift store prices find their way into your “A” budget whereas designer jeans go on the “B” page.

Your “B” page includes all of the extras. You may find that there’s not a lot left over for the “B” page at first when you are trying to live debt free today. But, over time, you will find that you can afford more things on the “B” page.

When you get a bonus at work, you can add it to the items on the “B” page. When you get a tax refund, it can go to “B” items. Any increases in salary or second jobs can fund “B” projects.

If you are serious about living debt free today, you will take a careful look at your budget. You don’t have to buy into the consumer culture that plagues America. You can chart your own course. In other words, you can be debt free today.