Debt consolidation is the art of snowballing little debts into one giant snowman. However, some debt consolidation companies might even make you believe that they’ll actually make the loans go away, or carve out such a wonderful deal that you won’t even feel the pain of repayment. Some of their promises include a guaranteed reduction in monthly payments or a near zero interest rate. Hello, who are we kidding out here? It’s time for a reality check – think of them as no more than a bad joke.

What debt consolidation might do for you, however, is to shift your repayment burden. If you do opt for it, in effect you will be taking a new loan to pay off old ones. Often, the new loan might be secured against some little property you may own, and therefore will entitle you to lower interest rates. Unless you’re certain of being able to pay it off, you’d do well to seek friends willing to offer you free accommodation once your home is taken over by the creditors!

Still, you might find debt consolidation a viable solution in case you’ve run up a huge sum on your credit card account. Credit cards typically carry very high interest rates, and if you choose to take a secured loan to clear off your payments, you’ll probably have saved yourself a few dollars in interest.

Assuming that you’ve decided to bite the bullet, watch out for the usual pitfalls.

There’s no such thing as an easy loan. If you’re what is politely called a credit risk, be sure that no lender is going to dish out the stuff without some pretty stiff conditions. If they make it sound like the loan approval is a done deal, run a mile! It’s quite likely that they’re going to charge you some astronomical interest rate, so cleverly packaged you won’t even know it.

Beware of smooth talkers. If the company you’re talking to promises to take care of everything, make sure they really do. After all, they’re going to get paid for it – if not from you directly, certainly from the creditor. Some companies are known to be slack, and land up delaying payments! When that happens, you go from looking bad to worse.

Watch out for predatory lenders. Oh yes, they do exist. Some companies wait and watch till a debtor has dug a little hole for himself, before they make their move. At times like these, the debtor is so desperate he’ll take any quick fix that’s thrown his way, even if it comes at the maximum permitted interest rates.

Since debt consolidation is a double edged sword, in time of need it is advisable to approach the larger or better known companies such as American Debt Consolidation or E-LOAN.But the bottom-line is that you will need to make a fundamental readjustment in your spending habits if you want a permanent solution to your debt problem.