Between mortgage loans, car payments and credit card bills, it's easy to understand why the average family is feeling suffocated by debt. On the flip side, creditors and banks are making millions each year from the excessive finance charges, late fees and overdraft fees they assess. For many, debt consolidation can be the light at the end of the dark tunnel.



While consolidating your debt will not actually lower the amount you owe, it does have many benefits that will save you thousands of dollars in the long run. For starters, you will only have one monthly payment to make, so you will be more likely to remember to pay your bill on time. That means no more monthly late fees, which can range from $20 to $40.

Your new loan should also have a lower interest rate, which will reduce your monthly payment. To help you quickly pay down the remaining debt, add ten percent on top of your minimum payment. Every extra dollar is applied directly toward your principle balance, which in turns lowers the amount of interest you are charged the following month. For example, an extra monthly payment of $200 on a $200,000 mortgage means you will own your home nine years sooner. You will also save more than $90,000 in interest, just by paying $4,200 in principal earlier than you promised.

As your balances are lowered and payments arrive on time, you will also notice an increase in your credit scores, which will translate into lower interest rates when you apply for other loans.

After your loans are paid off, contact your old creditors to make sure your accounts are closed. You may want to keep one open for emergencies, but cancel the rest. After all, you don't want to end up in the same place again, right? Follow up this phone call with a written letter to the creditor stating that you would like them to report to the credit bureaus that this account was closed at the consumer's request.

If you prefer a more personable approach, visit your local bank to find out what programs they offer. If you prefer shopping for loans from the privacy of your home, then the internet provides a wide variety of choices. Reputable companies will not charge high fees for their services, promise quick fixes or attach inflated interest rates to the loan. Also, be sure to ask about application fees, hidden fees and whether or not customer service is available.