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When you have a number of debts hanging over your head, trying to keep on top of them can give you many grey hairs. The problem is that, just like a small hole can fill up a boat with water over a period of time, having numerous loans can sink you as well. How? Take credit card debts for example. Sure, flashing plastic at a store can be extremely fun. Retail therapy can be satisfying, and there's nothing like the radiant glow of an individual who's shopped and found some great bargains. But getting the colossal billing statement at the end of the month can be one giant slap on the face, especially when you find that you can't afford to make anything more than the minimum. Sure, that works. But that's only on one credit card, what about the others? If you are like most people, you probably have other credit cards in your name. And what about the basic expenses of daily life, like rent or mortgage payments, car payments, food, phone bills, gas? When you add all these expenses up, you may find that your salary just can't cover everything. That's when you're in trouble.

For some people, debt consolidation is the most effective solution to their difficulties. Make sure you read through the loan contract before signing anything. Debt consolidation is a way for you to settle your outstanding debts by taking out one big loan that covers them all. This loan is called a debt consolidation loan, and it is normally secured against one of your possessions, such as your home. Because you put down collateral for the loan, the risk to the lender is lowered, and they are better able to offer you a decent interest rate than an unsecured loan, and for a longer period of time for repayment. It also means that if for any reason you cannot keep up with the payments for the debt consolidation loan, the lender can take the asset you used as collateral. If the asset happens to be your apartment, then you are going to be without a roof over your head.

So debt consolidation is not without risk to yourself. However, there are several advantages to this scheme, such as:

* You will have a single payment to make monthly to one lender, instead of juggling several bills.

* The money that you have to pay monthly can be lower than the total amount you were paying off beforehand.

* Because it is a secured loan, it has a fixed interest rate.

* Assuming that you keep up with the payment scheme for the debt consolidation loan, your credit score will not be affected, as would have happened if you defaulted on your credit card bills or other loans.

In order to make sure that debt consolidation is your only choice, do some research beforehand, and speak with a debt advisor or a loan arranger. They may be able to come up with a way for you to pay off debt which is more suitable to your financial position.]