By Sean A. Kelly

Debt consolidation is a form of debt relief that is the most common and popular choice among Americans. It is not necessarily the most recommended by professional experts due to the fact that debt consolidation means acquiring a new debt in order to pay for existing ones. You need to understand the mechanism of debt consolidation before even deciding to consolidate your debts. First you will need to ask yourself if your goal is to get lower interest rates or get better terms of payment. Debt consolidation is not a quick-fix to your financial problems. It carries big risks especially if you decide to consolidate your debt with a home equity loan where you put your home as collateral. That means you could easily lose your home should you default on the payments.

If you have a relatively large debt, the suitable debt relief option for you can be debt consolidation. This is because by consolidating your debts you will combine all your debts from various creditors into one single loan. So you just have to concentrate on paying the one creditor you have. You also need to understand that the interest rate for debt consolidation can be relatively low but the pay back period is longer so you probably will end up paying a lot more than what you borrowed. The low interest rate is merely there to reduce the amount of payment you have to make every month.

If you ever need help with debt relief option, you just have to identify the nature of your debt and then ask for expert’s advice on the matter and how you are going to solve it. You might be drawn to the concept of debt consolidation but bear in mind that it is not always the best solution to your debt problems. Usually debt consolidation is suitable for people with debts from multiple numbers of credit cards that amount up to a very large sum. Interest rates on credit cards vary and are normally quite high. By consolidating the credit card bills, the person is then able to pay off all credit card debts by using the money from the consolidation loan.

A person also has the choice of consolidating debts by several methods as follows:

1) Home Equity Loan – taking a home equity loan means taking up a loan against your own home. Your home will be put up as collateral should you suddenly become incapacitated and can not make the necessary payments. Home equity loans have the same basic concept as home equity lines of credit. The only difference is that the home equity loan is paid to you in one lump sum whereas the home equity lines of credit are a series of credit that you use as and when needed by means of a credit card. It is not advisable for you to take up a home equity loan if you are going to use the money to pay your credit card debts.

2) Personal Loan – sometimes also called a consolidation loan due to the nature of its inception. This particular loan does not need any form of collateral so naturally the interest rate is higher. But you don’t run the risk of losing your home if anything should happen.

3) Credit Card Balance Transfer – the irony of this particular concept is that you are to apply for a new credit card to pay off your existing credit card debts. Basically you will be shopping around for a credit card with 0% for 12 months and you will be transferring all the balance from your other credit cards to your new card.

Debt consolidation relief is not a favorite among professional experts because it cannot really be described as settling a debt but merely moving your debt to a temporary location that eventually will catch up to you. However, if you feel like it is what you want to do, the choice is definitely yours.

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