There are many reasons someone would decide to consolidate debts they have run up. The most obvious reason is someone living above their means. But there are other less glorious reasons that have sparked lenders to display advertisements on radio, television, and billboards. As the country goes more and more into debt, lenders now offer a way out. Consumers with major debt loads, some juggling two or more loans, have seized the opportunity to get their finances in order. But the ads don't warn that not everyone will qualify for this loan. Also, you will have to offer one of your long-term assets, like your home, to get in on the action. While debt consolidation is not all that those ads glorify, it is still a great way for people with moderate debt and some equity in their home, cottage or other tangible asset.



But just what are the real benefits you can gain when you decide to consolidate your existing debt. Let us discuss a few of these.

1. You can remove or reduce the interest and penalties on the old loans. When most people decide to consolidate their debt, they would have incurred significant interest on the balances owing. Unless you can negotiate to have these charges forgiven, the lender will carry them over to the new loan. So this is an area where you have to take an active role in your loan application. Do everything you can to avoid having these compounded charges carried over to the new loan. If the lender does not budge, you can go loan shopping.

2. You only need to worry about one payment each month. This is the main reason most people decide to consolidate their loans. The stress of having to juggle payments every month can affect your health. You know the scenario: you decide to pay one bill over another so you can continue to receive the service. This is true of electricity, water, and telephone bills. The next month, you might take the chance of paying the telephone bill late, hoping the carrier wouldn't notice. Then

the next month, you wouldn't pay any of your "must pay" bills because you have a family emergency that needs quick cash. Most of us have gone through this juggling act at one time or another, so we know how hard it is.

3. You will most likely get a reduced rate of interest on your new loan. This is important. The interest rate decides how much your monthly payment will be. If you have a high interest rate, you will pay more each month. So you need to negotiate a favorable rate you can comfortably handle. Of course, the rate will also depend on what security you offer the lender. Using the equity in your home will often get you a reasonable rate. But don't settle for any rate because that is what the lender is offering most people. Negotiate for an even better rate. And bear in mind that most people will settle for whatever the lender offers. You want to be above the crowd.

Some wise people have noted that you don't go to a bank when you need money. While this statement may seem odd, it is true. Once the lender knows you need the money they can be tough negotiators. Similarly, when you decide to consolidate your debts, you will be at the mercy of your lender. However, you can still make the most of your time in front of the loans officer.