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Debt consolidation is the process by which you get a loan to cover the costs of all your debt, essentially paying off your debt all at one time. Like all things, there are advantages and disadvantages to using debt consolidation as a means to be debt free.

Let's discuss both the benefits and the not-so-beneficial aspects of debt consolidation:

The Advantages of Debt Consolidation

Reduced Monthly Financial Obligations
When you pay off all of your debts with consolidation loan, you can end up saving a lot of cash because you now only have one payment to make each month toward your loan.

Lost Interest Rates
By paying off your debts in full, you are no longer accruing interest charges each month on your credit cards. You may also be able to qualify for a lower interest home equity loan to pay off your debts, which will also help to save you cash.

Easier Bill Tracking
Besides your regular monthly bills such as utilities, you will only have to write one check to a single creditor each month. It can certainly help your accounting practices more manageable and you can staft working on and focusing on a plan to a better, more secured financial future.

Tax Relief
If you use the equity in your home to consolidate your debts, you may earn additional tax breaks on the interest you have paid. Try doing that with your credit card interest rates.

The Disadvantages of Debt Consolidation

Ineligibility
In some cases, you may not even be able to find a loan to help you consolidate your debts because your debts are just too much. There will also be the desperate consumers who will take a loan that has outrageous interest rates just to get out from under debt.

Poor Money Management
One of the biggest risks many consumers face once paying off their debts concerns how they handle the extra money they now have each month. It can be much to tempting to spend that cash irresponsibly instead of having a savings plan in place.

Risk More Debt
When you pay off the debts of a credit card, it can also be tempting to start using your plastic again. Soon many consumers find themselves right back in debt without any way to pay it off, while still having to meet the payments of the consolidation loan.

More Expensive Route
When you take out a loan for consolidation, the terms of that loan may be much longer than your original debts would have gone. You may wind up paying more in interest in the long run, depending on the length of the loan.

Risk for Losing Collateral
When you take a home equity loan to pay off your debts, you stand a very real chance of losing your home should you default on your loan payments.

Depending on your personal financial situation and your money perspectives, debt consolidation may be the ideal choice for you to help with debt or it may be the worst idea ever. Overall, the decision on how to handle your debt is up to you – just as long as you are handling it. Do your research and explore all of your options before rushing to a decision because the creditor pressure is building; otherwise, you may end up losing your money, your home, and your financial future in no time.

About the Author:
Tisha Kulak Tolar is a writer for http://www.LeaveDebtBehind.com where she regularly writes about debt consolidation, getting out of debt, debt settlement and saving money.

Keyword tags: debt consolidation, debt relief, debt management, get out of debt