Debt is enough to cause anyone sleepless nights and stressful mornings when the mailman arrives with the latest bills that have to be paid. Money worries can affect family life and take a heavy toll on individual health – particularly if alcohol is consumed to avoid having to confront the mountain of debt many of us find ourselves in.

You may have considered debt consolidation as the answer to your problems as it rolls up all the credit card and store card debt you have accumulated, gets the creditors off your back and could lower your monthly outgoing payments. For some people who are usually very good with money and have got in to debt through no direct fault of their own – maybe the health bills racked up or there was a period of unemployment – then debt consolidation may be the answer to managing your debt and reducing your monthly expenditure.

However, if you got in to debt because you were using cheap credit to fuel your lifestyle then debt consolidation may actually be a bad idea because you are exchanging unsecured debt for secured debt and if you continue living how you have been then your home may be in real danger. In this case it may be worthwhile contacting your creditors to explain your situation and take a hit on your credit score rather than risk becoming homeless. A credit score can always be repaired, losing your home is catastrophic.

Before applying for a debt consolidation loan there are some factors you need to consider. The first is that you may be charged a fee to process the loan, the second is that even though the interest rate is lower and fixed the duration is much longer which means that in the long term you end up spending more on interest than if you simply paid off your credit cards. Finally there may be no option for early repayment or they may charge high fees to pay the loan off early, whereas a credit card company will gladly accept a lump sum payment with no fees if you are paying off your debt.

There is just one question to ask yourself if you are considering getting a consolidated loan which is: are you changing your lifestyle to get out of debt or will you continue to need credit cards to survive? If the answer is that you will need to keep using credit cards then debt consolidation is definitely not the right option for you. If you are committed to cutting up all your credit cards and sticking to a strict budget then consolidating your debt may be the way to help you become debt free within 5 years.