Consolidating your existing debts into one smaller and more manageable monthly repayment can often be the solution that helps you get your money matters back on track.

Juggling the payments on a number of credit commitments can be a time consuming exercise and a constant headache. By consolidating your debts you can put an end to the stress caused when lenders are calling and writing to you regarding missed or late payments and charging you hefty penalty fees in the process.

But the decision to consolidate existing credit commitments should not be undertaken lightly and certainly not considered as an easy way out and a cure-all.

If used properly it can help you get debt free faster. However if there are more serious underlying problems and you continue to spend more than you are earning, then it may only grant temporary relief before the creditors start hounding you again.

If you take a consolidation loan to clear credit card commitments, it is essential that you use the money to repay those debts then close the accounts and destroy the cards. If you keep your credit cards in your purse or wallet, you may be tempted to use them again in a moment of weakness, and before you know it you could start accruing more debt that you can ill afford.

A Consolidation loan should be considered in the following situations:

• If you're paying high interest charges on your existing debts and want to switch to a cheaper deal.
• If you need to reduce the size of your monthly payments, because of pressure on your finances from many individual monthly debt commitments.
• If you need to cut down the amount of money you are paying out, due to a change of circumstances, such as a reduction in income.
• If you need to release additional money to meet unexpected commitments, freeing up extra cash from your home whilst keeping your monthly repayments at a manageable level.

A Consolidation loan should not be considered in these circumstances:

• If you've already consolidated your debts several times in the past and your level of debt continues to increase.
• If this consolidation loan is to refinance debt still owing from previous consolidation loans.
• If you want to move debts from credit and store cards so that you can start using those cards again.

Depending on whether you are a homeowner or tenant, there are two different types of consolidation loan.