Debt Consolidation means taking out one loan to pay off all your other loans, excluding your mortgage. There are two main situations where you may be considering taking out a debt consolidation loan:

- Firstly, where you have lots of separate debts and are struggling to pay all of them each month.

- Secondly, where you have several different debts you have to pay each month and are simply looking to save some money on repayments each month

Debt Consolidation can be suitable for both of these situations because it makes the total amount you have to pay each month smaller than the total you are paying when you add up all the individual debts. There are two reasons why the amount you pay each month with a debt consolidation loan is smaller than when you add up all the individual totals:

- Number 1: The interest rate you pay will almost certainly be lower. This is because the interest rate on credit card debt is typically very high, whereas the interest rate on a debt consolidation loan is typically close to mortgage interest, which is normally much lower. The end result of this lower interest rate is that your monthly payments are lower

- Number 2: The duration of the loan can be longer. Because you are paying back the loan over a longer period of time this has the effect of reducing your payments each month.

Thus, if you are paying both a lower interest rate and the duration over which you're paying back the loan is longer then you have two powerful forces combining to make your monthly payments significantly lower than they currently are. This then is why debt consolidation might be right for you if you are currently struggling to pay your debts each month, or if your simply looking to save some money each month by consolidating all of your debts into one.

Before you go out and immediately start looking for a debt consolidation loan, you need to be aware that there is one major reason why a debt consolidation loan might not be right for you. This reason is entirely dependent on you and your personality. When you take out your debt consolidation loan then all your existing credit card debt will be paid off and replaced with the debt consolidation loan. It is up to you to not start building up debt again on your credit cards. If you do then you risk being in a worse position financially then before you took out the debt consolidation loan. In fact I recommend destroying your credit cards to avoid the temptation of getting into further debt.

I hope this article has given you enough information so as you can make an informed decision on whether debt consolidation is right for you.