Many people who have debt problems probably have asked themselves the question what is debt consolidation and how can I benefit from it? This short article seeks to give you a brief run down of the benefits and downfalls of debt consolidation.

Debt consolidation involves taking out a loan, either unsecured or secured, to pay off more expensive debts. A good debt consolidation loan will either reduce the monthly payments to a more manageable level or reduce the duration of the term of the loans. A really good debt consolidation loan will do both!

• If you are servicing expensive credit card bills making minimum monthly payments then a good debt consolidation loan will reduce your monthly repayments and the term of the loan.
• Having a poor credit score will mean extending the duration of the loan to get a lower monthly repayment.

In summary you should really only consolidate credit card debts since other unsecured loans will involve an early settlement penalty and to then put this debt into another loan would be expensive.

• Beware of debt consolidation companies who try to get you to consolidate all your debts, without first getting Early Settlement figures for any unsecured loans you have.
• Don't be blinded by the reduced monthly figures, check the duration and APR of the loan and forget to compare loans to get the best deals.
• Debt consolidation can be disastrous for those who ignore their debt problem and think that the money saved by the reduced monthly payments is not used to reduce their overall debts.

Debt consolidation should only be used by those who have control over their finances and fully understand where their money goes on a weekly and monthly basis. Control is the foundation stone for successful debt consolidation and it can be gained through taking the time to do a statement of affairs. If you don't how you spend on a day to day basis then you will need to keep a spending diary and log everything you spend. From this you'll be able to see where savings can be made and you'll be able to accurately predict your spending. In doing this you'll not only create a path to successful debt consolidation but also to financial success.