Perhaps you've run across the term "debt consolidation" while watching television or from junk mail you've received. You may have also found your budget getting tighter as gas prices, energy costs and even the cost of groceries keep going up. As a result, debt may be putting a crimp in your income more each day. You may start looking for debt relief as you find yourself using credit just to make ends meet. This can be the point when debt consolidation comes to mind.

Debt consolidation is a procedure where you're combining your debts into one loan or payment so you can, hopefully, save some money. The goal of debt consolidation is to reduce your monthly payments or acquire a lower interest rate on debt. The ultimate idea is to not only free up money in your budget, but to completely pay off your debts.

You may be able to meet the criteria for an unsecured debt consolidation loan to consolidate your credit cards and other unsecured debt. Unfortunately, most situations require collateral for combining unsecured debts into a debt consolidation loan. Usually, the collateral required to secure the loan is your home or other real property, which is why homeowners are repeatedly swamped with home equity loan offers.

On the bright side, a secured loan offers a much lower interest rate than an unsecured debt consolidation loan because the lender assumes less risk. You'll probably find the reduced interest rate to be the best way to consolidate your debts and hold onto more of your income each month.

Another kind of debt which could become hard to handle as time passes is student loans, either your own or those that you took out to help pay a child's college expenses. The process of consolidating student loans involves a different procedure than the one used when consolidating ordinary unsecured debt.

Generally, you are allowed to consolidate student loan debt with a private lender one time to receive a better interest rate. After you've taken advantage of the private refinance option, you can only refinance again through the Department of Education. Student loans are actually not refinanced. Instead, the amount owed on the student loan is locked into a fixed rate of interest, unlike standard refinancing.

Debt consolidation can be very helpful for both student loans and unsecured consumer debt as a way to reduce interest payments and pay off the debt. Consolidating a number of debts into a single monthly payment can ease the budget and add to convenience. However, it usually comes at the cost of putting up your property as collateral.

Debt consolidation can give your financial situation a boost, with careful research and planning. Nonetheless, if you carry on with racking up debt, it won't help your economic condition recover in the long run. Your best options for dealing with your debts is to stay informed, periodically review your budget and, if you discover your earnings are stretch too tight, think about debt consolidation.