Debt consolidation is one way many people are able to pull themselves up out of debt and make their lives considerably easier and stress free.  Basically what you do when you consolidate your debt is apply for a debt consolidation loan, exchanging numerous monthly payments with numerous creditors into one monthly payment with one creditor.  Your new monthly payment should be lower than all of your previous monthly payments combined, although paying off the new loan could take longer than simply paying off the old ones.  The idea behind debt consolidation and being worry free when it comes to your bills makes paying that extra length of time very appealing to people who are having financial troubles. 

There are three types of debt consolidation loan you can choose from when you decide that you want to go this route to pay off all your bills.  The first type of loan is an unsecured loan that you can obtain from your bank or building society.  This type of loan requires no collateral to be placed against the money you borrow.  Collateral could be your vehicle or your home, and if you should default on the loan the lender could repossess your property in lieu of payment.  With an unsecured loan you do not have to worry about losing your property.  However, the interest rate you pay for an unsecured loan will be higher than most other loans. 

A secured loan, on the other hand, is a loan that uses a piece of your property as collateral to ensure that the lender gets their money back one way or another.  The collateral can be any piece of property you own that is worth any value, such as your home or vehicle.  As mentioned above, when you use a piece of your property as collateral, you could lose it if you default on paying the loan.  You can find secured loans from numerous companies at highly competitive rates. 

Finally, the third type of loan is a re-mortgage loan that frees some of the equity in your home to use to pay off the bills.  This type of loan generally has a lower interest rate, more often than not the same as your mortgage rate.  There are two very big disadvantages to this type of loan.  One, you will pay for the re-mortgage over the same period as your mortgage, paying more out in interest, and two, you could still lose your home if you default. 

When you consider taking out a debt consolidation loan, always get a settlement or payoff balance from them.  If you simply ask them for the balance, you could find yourself being left with straggling penalties and charges for early completion that would be included in a settlement of payoff figure.  Before you sign any paperwork for the new loan, incorporate it into your current budget to make sure that you really can afford the new debt consolidation loan with emergencies and contingencies included.  If you can't consider calling a professional debt consultant who can help you develop a better debt management plan.