You see them all the time. Those ads and websites that scream “Consolidate Your Debt & Save Big!!” Are they full of you know what? Can you really consolidate your debt and save big? The answer is: Sometimes, on both counts. There are definitely circumstances when it is the best course of action to consolidate your debt and lower your monthly cash outflow by getting a good debt consolidation loan. The key is knowing when that is, because there are also times when it definitely not the correct thing to do.

If you have gotten in a bit over your head with monthly bills, and many people have done just that, you first need to analyze your expenses and income. Where does your money come from? Where does it go? If much of your debt is credit card bills, you need to look at what you used the cards for. Was it emergency expenses such as car repairs or medical bills? Or do you have a consistent pattern of spending for things such as clothes, dining & drinking out, recreation, Internet purchases, jewelry and performance car parts / accessories? The latter can be considered non-essential consumption. While it does help the national economy in the short term, it does little for yours.

If you have incurred some emergency expenses that caused your credit balance to substantially increase, but it was an extraordinary expenditure, you may be a great candidate for a debt consolidation loan. You must realize that, if you obtain such a loan, the reason the interest rate is so low is that debt consolidation loans use the equity in your home to secure the debt. If you fail to repay the loan, you could lose your home. If the credit card bills are high due to emergency expenses, the likelihood of you continuing to increase the balance on your credit cards is fairly low. You can put the equity in your home to work for you to help your cash flow by substantially decreasing your monthly credit card payments.

If you have, and continue to increase your credit card balances through a pattern of spending, you are probably a poor candidate for a debt consolidation loan until you change your spending habits. If you fail to do so, you will continue to spend more than you take in every month. Once you get a debt consolidation loan, you will no longer have the equity in your home to bail you out. You could easily lose your home to foreclosure. You must decrease your nonessential spending each month. While it may be nice to buy a new outfit or go out with your friends every week, This qualifies as nonessential spending. You need to stop such spending until you get your credit card bills under control and increase your monthly income.

A debt consolidation loan is a great tool to help your finances, but only in the correct situation. Like every other tool, you need to use it in the right circumstances. Just like you wouldn't use a screw driver to pound in a nail, you shouldn't use a debt consolidation loan except in the proper situation.

See The Debt and Loan Consolidation Guide for more information about getting out of debt and staying that way.

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• Most any large city has a number of small shops offering payday loans. They’re often found in strip centers; sometimes they double as pawn shops. They have a simple business – they lend you money until your next paycheck. The system is pretty convenient; you write them a postdated check for the amount you’re borrowing plus interest. On your next payday, they cash the check and your loan is paid off. What many people who use payday loan services fail to realize is that the interest rates charged by these firms are substantial, often reaching the equivalent of four hundred percent per year!
  
  
• To get a secured loan it can take time for loan approval, as the property will be inspected and appraised. Unsecured loans such as credit cards are usually faster to acquire, however the loan approval time may include a credit check. A credit check involves a lender getting a copy of your credit report to inspect your credit history.
  
  
• Credit card balance transfers
  
  
• All kind of loan – educational loans, auto loans, secured loans, unsecured loans, personal loans and any kind of loans – can be consolidated under debt consolidation mortgage. It is highly appropriate to adopt debt consolidation mortgage if you have numerous debts. However, a prudent step will be to understand debt consolidation if you actually want to apply for it. Debt consolidation mortgage has the capability to be turned in a way so as to allow maximum monetary benefits. Yet, one little error with debt consolidation mortgage and your situation will be back to square one.