Debt consolidation loans work by borrowing enough money with which to repay a number of existing commitments and obligations and have one single payment of a lower amount than the aggregate of the previous instalments.

Debt has a habit of mounting slowly over time to such an extent that it is easy to ignore until it is too late and becomes a hard core problem. Borrowings for the house, car purchase or furniture acquisition tend to stick in the mind whereas credit and store card debt is more invisible due to the nature of only having to make the monthly minimum payments to stay 'up to date'.

We would all like to feel that we have the best deal on everything we buy or acquire. This is true of loans - although what was a good deal last year may, in the current climate, now look to be more of a burden than a blessing. Therefore, considering a loan with which to refinance the personal finances may be a good option - especially if you have managed to maintain a good credit history.

There are numerous internet companies that offer consolidation loans and the terms on offer will vary depending upon the amount you wish to borrow, your personal credit history and how much free equity you have in your house.

Generally, loans of below £7,500 for a prospective customer with a good credit record should be unsecured. Equally, loans of above £15,000 are more likely to be offered only on a secured basis - that is with some form of assets pledged as security which, for most people, is their home. Between £5,000 and £25,000 is a "grey" area and the terms available will be specific to the applicant and their personal situation.

Unsecured loans are just that. These are loans to you which are not tied to any form of security such that in the event you default on your repayments, you will be sued through the courts for the balance plus penalty interest and charges.

Secured loans are offered on the basis that you have some form of security to pledge against your commitment to repay the loan. This is usually property or land though can include stocks and shares, jewellery or any asset with a readily realisable sale value. If you fail to make the payments, the creditor can call in their security and sell the assets to clear their balance. Any surplus will be repaid to you but, by then, the assets have gone. If the security pledged was your home (which for many people it will be) then the consequences are dire.

Considering any form of secured loan should, therefore, be taken with care and with professional advice. The consequences should you fail to keep up the repayments on your home are significant and you need to make sure that you have the future wherewithal to make the payments.

Debt consolidation loans that are secured on your home will normally be second mortgage charges and will rank behind your main mortgage lender in terms of priority. This means that if you default on your consolidation loan, and it is not with your primary mortgage lender, then even if you are up to date on your main mortgage your house could still be repossessed. All that happens is that when the house is sold, the proceeds of sale go first to the primary mortgage holder and then to the second mortgage holder. Therefore you should make sure that the mortgage (of whatever nature) is always one of the first bills to be paid each month!

Debt consolidation loans are a great way to get back in control of the family finances. Secured loans are more expensive to set up, attract lower interest charges and have longer repayment periods so will not be for small amounts. However, they can be an excellent way of rebasing the family budget for the future. Free advice on all debt matters and options is available from any Citizens Advice Bureau.

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