Have you ever sat behind a stack of bills and fantasized about writing one check each month to cover them all? Does the thought of incurring finance charges as high as 24% leave you wondering if loan-sharking really is legal? If you are like many people, numerous high-interest debts and personal loans–be it UK personal loans or loans lent by any institution outside of the UK–are not just a nuisance. They are a liability. However, debt consolidation may offer the relief you need. Before you seek debt consolidation, though, it is imperative that you become an informed consumer. Otherwise, you could find yourself in even worse financial trouble.

Debt Consolidation vs. Debt Consolidation Loans

First, understand that debt consolidation and debt consolidation loans are two entirely different methods of combining and lowering debt. Debt consolidation involves a third party—sometimes a lawyer—to negotiate down your debt, interest rates, and/or payments.

Debt consolidation loans are personal loans that you take out to pay off all of your other personal loans, thereby eliminating numerous payments and (ideally) higher interest rates.

Debt Consolidation

Are you faced with mounting loan payments, but getting a debt consolidation loan is out of the question? Debt consolidation may be the answer. There are many non-profit and private debt consolidation companies that specialize in negotiating with creditors to lower debt and/or interest rates. Write a monthly check to your debt consolidation company, and they will disburse it appropriately to your creditors—saving time and stamps.

Be warned, however, that some debt consolidation companies can be disreputable. Make sure to check with the Better Business Bureau to make sure that you’ve chosen a reliable debt consolidator. Also, it’s important to realize that debt consolidation may hurt your credit scores. However, if all that’s standing between you and bankruptcy is the bill collector, then plain-old debt consolidation may be your ticket to financial security.

Two Types of Debt Consolidation Loans

If you choose an unsecured debt consolidation loan, you do not need to use collateral—such as your house—for collateral. Generally, unsecured debt consolidation loans have higher interest rates. However, they can still be significantly lower in interest than other personal loans (credit cards, etc…) you may currently be carrying.

Secured loans generally have lower interest rates, but carry one major inherent risk: If you cannot pay the loan back, you may lose your home. Today, nearly 80% of people who get debt consolidation loans go right back and run up their other debt again. If you can make sure that you are in the remaining 20% of people who use debt consolidation loans to pay off personal debt—without running up any additional debt—then using your home for collateral is worth the risk.

Lowering personal loan debt can be tricky. However, with a strong understanding of the different types of loan consolidation available, anyone lower payments and/ or debt. They key, however, is be informed—and frugal.