Debt consolidation is a plan that allows you to combine all your bills into one monthly payment. This is done with a loan provided by the debt consolidation company that is used to pay off your credit card bills and other debts. Once your creditors have been repaid, you send payments to the debt consolidation company to pay off their loan to you.

By combining your bills into a single low interest rate loan, you are able to eliminate the high interest payments you have been making, thereby reducing the total amount of your overall monthly payment. If you are struggling to pay your bills each month, debt consolidation may be the right choice for you.

Taking on a debt consolidation loan as a way to pay off several monthly credit card payments might not be as beneficial as it may seem at first. Offers for low interest rate loans seem to be everywhere these days, but you should know that it takes a good credit history to qualify for the lower interest rate. Most likely, if you're struggling with credit, your credit score won't be high enough to qualify for the lower interest rate. Not only that, if you don't have anything to offer as security, your interest rate could be higher. Without the lower interest rate, the cost of a debt consolidation loan isn't as attractive.

There are other options for consolidating your debt rather than going through a debt consolidation company. Some consumers take out a second mortgage on their home, using their home equity to pay off the money they owe to creditors. Then they have just one loan to pay back, their home equity loan. One thing to be aware of when using this solution is not defaulting on the line of credit. Since your home is used as security, you could lose your home if you default on the loan.

A final option for consolidating bills is to transfer the balances to a single low interest rate credit card. As with debt consolidation loans, you might not qualify for a low interest rate if you have a poor credit history.

While debt consolidation is certainly an option for making your debt easier to manage, it doesn't come without its risks. Before you choose any debt consolidation option, make sure you weigh the pros and cons and understand all the risks involved. No debt management solution is worth it if you end up in a worse situation than you started in.