If you have quite a few debts, there are processes available by which you can have your debts consolidated and pay only one installment per month to pay off the debt. Debt consolidation is like taking out one loan and using it to pay off your creditors. In consolidating your debts you get to secure a lower interest rate, secure an interest rate which is fixed, or you go for consolidation in order to service only one debt.

In consolidating your debts the benefits would include:

* You may save good amount of money in interests.

* You may have the overall debt burden reduced along with the interest rate.

* Debt consolidation may put a stop to creditor's harsh calls.

* It will help you to build up your financial condition.

* By consolidating your debts you may cut payments by up to 60%.

* Avoid bankruptcy.

Debt consolidation is for someone who has a financial crisis in hand, with several debt problems which have become very difficult to be met with. It is not something which may be entered into by everyone. More-over, you would need to have a reputed credit counselor in order to solve your financial problems, since debt consolidation is not a part of credit counseling. Even if you sign a debt consolidation services, your credit counselor is under the obligation to provide you with the other services, such as, preparing a budget for you and provide you advices on how to manage your finance.

The process is simply the collection of all your various unsecured loans and converting them into one unsecured loan. However, most of these loans involve collateral security, most commonly a house, or any other form of asset. The mortgage is secured against the house, and this reduces your interest rate more than it would be without a security. Through pledging the asset for a loan, the owner of the property agrees to allow foreclosure by allowing the sale of the asset. In this way, the risk of recovering the money to the lender is reduced, and as such the interest rate comes down.

Depending upon conditions, the consolidation company may provide discounting of the loan. In situations where the debtor is at the brink of bankruptcy, the consolidator may buy the loans from the creditors at a discounted rate, and may pass some of the benefit to the debtor.

Debt consolidation is often advised in case of a credit card debt, where such debts carry a very high rate of interest, compared to any unsecured loan from a bank. If you are a debtor with a property, such as, a house or a car, you may approach for debt consolidation by pledging the asset to get a lower interest rate in paying off the loan. This would bring down the total interest rate payable and the total cash to be paid against the debt to a much lower level for the debt to be paid off sooner.

By habit, people with credit cards tend to more and land up with large credit card dues. This habit needs to be controlled, as otherwise there will not be much benefit from the process, for they will spend again, more than they can afford.

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