Debt Consolidation is a process in which multiple debts (credit cards and loans) are consolidated (or condensed) into one larger loan. Why in the world would you take on another loan when you’re already flooded in debt?

Debt consolidation allows you to:

• Organize all of your credit/loan payments into one monthly bill
• Lower your monthly payments, sometimes drastically
• Pay off your debts in a shorter amount of time - sometimes

Overall, debt consolidation can usually be a good thing; however, if you have bad credit or you are working with a bad company, you may end up paying more per month than if you paid off your debts individually, because you could end up with a very high interest rate.

In the long run you will not save money with a debt consolidation loan. In fact, after you pay off the consolidated loan you may end up paying as much as five times more money than if you had paid off your debts individually.

If you need breathing room from month to month, one option you may consider is speaking with the banks that you owe money to. They may be able to work out a payment plan that can help you lower your monthly payments (usually at the expense of a longer pay period).

Before you do anything to consolidate your debt, remember to do the math. Organize all of your payments and do the math, then look at your options and weigh your current monthly payments against your future monthly payments, then consider how long it will take to pay off the debts.

Ultimately the final decision is up to you. Debt Consolidation can be a lifesaver, but make sure you know what you’re getting into before you sign the dotted line.;

[tags]debt consolidation[/tags]