Whether you want to pursue debt consolidation in order to make a good financial situation better or to pull yourself back from the brink of bankruptcy you will want to consider the good and bad things that may result from the choices you make.

Perks and Potential Benefits of Debt Consolidation

1. Debt consolidation should lower your monthly payments, and preferably your interest rates as well. This will lower the long term cost of your debt.

2. Debt consolidation may improve your credit rating and make it easier for you to purchase a home or automobile.

3. When done properly debt consolidation can remove a great deal of emotional and financial pressure from your life.

4. Debt consolidation may help many people avoid having to file for bankruptcy.

5. A significant benefit of debt consolidation is the elimination of harassing phone calls from creditors and collection agencies. This will happen more quickly when debts are paid off through home equity or personal loans. It should still happen over time through debt management plans when the creditors realize you are working in good faith to pay off your debt.

Pitfalls or Things to Avoid in Debt Consolidation

1. Avoid debt consolidation loans or plans that require high up front fees. Reputable lenders and credit counseling agencies generally charge low fees, or no fees.

2. Avoid debt consolidation plans that promise large reductions in your debt in a short period of time. There are no quick fixes. Debt reduction takes time an effort.

3. Avoid debt consolidation loans that are at higher interest rates than those you are currently paying. Paying more interest will not lower your overall debt.

4. If you choose a debt consolidation through a debt management plan make sure the credit counseling agency you choose pays all creditors in a frequent and timely manner, otherwise your accounts could become more delinquent, accruing more fees and sending you deeper into debt.

5. One of the most common pitfalls of debt consolidation occurs when consumers pay their credit cards off but continue to use them. Most people quickly max out again and end up with more debt and more pressure than they had before they chose debt consolidation.

If you make sure to choose your lender or credit counseling agency carefully, and know what you are getting into, you will avoid the pitfalls and debt consolidation will be a positive step that benefits your overall financial situation.