Online debt consolidation is something that can bring you great relief as your payments go from many to one. This can come in one of two forms, a loan or a debt management plan (DMP). Which one of these will work best for you will depend on your financial situation and how you manage your money. Let's look a little more closely at each of these forms of bill consolidation.

The first type of debt consolidation is done with a loan. In most cases, the amount of money required to consolidate bills requires a loan that is secured with your home or a second mortgage. The benefits are lower monthly payments, tax deductible interest, lower interest rate and one monthly payment.

The downside of a debt consolidation loan is the length of the loan. The reason the payments are lower is because the loan has been spread out over a longer period of time. The big disadvantage to debt consolidation loans is they are secured with your home. If you do not make your payments, the lender has the right to foreclose on your home. You must also be credit worthy to use this solution for consolidating your debts.

The second type of debt consolidation is done through a credit counseling service. Your bills are consolidated and you make one monthly payment to the credit counseling organization who then disburses your payment to your respective creditors. The benefits are one monthly payment, reduced and possibly eliminated interest rates, elimination of fees and no more interaction with debt collectors.

The disadvantages are the possibility of your credit being effective negatively in the early stages and your credit accounts are closed. But these are things that will change as you near the end of your debt management plan. These are not things that should deter you from using this option.

Which of these plans you use depends on how stable you are financially and how disciplined you are with money. In most cases, it is not a good idea to try to resolve credit card debt with a loan. If you have credit card debt, the worst thing that can happen is your accounts will go to collections and your credit will be negatively affected. However, if you consolidate your debt with a home equity loan and you cannot make your payments, you could lose your home. Credit counseling is one of the best options for consolidation and paying off your debt.