Many people find that over time they have accumulated more debt than they can repay. When that happens, there is a reinforcing downward spiral. The inability to repay the debt leads to additional interest charges and penalties, making it still harder to repay the amount owed.

One common suggestion for breaking this vicious circle is to employ debt consolidation. For thousands, this has seemed like the way out, the way back to financial health. But there are pros and cons to debt consolidation, no matter what form it takes. Being aware of those will help you decide if it is the salvation in your particular circumstances.

First, what is 'debt consolidation'? At base, it's a simple proposition. Gather all your multiple sources of debt into one debt and make a single payment every month to a single debtor.

But for that to be helpful several things have to take place at once. After all, whether you pay $150 + $50 + $25 to three debtors or $225 to another it's the same amount. With online bill payment it isn't even necessary these days to make out three checks. You aren't even saving on postage stamps!

In order for debt consolidation to be useful one or more of the following has to occur: (1) either the total monthly payment has to decrease , or, (2) the net amount of interest has to decrease, or, (3) the actual total debt has to go down as a result of consolidation. Which, if any, of these take place depends on the specific debt consolidation plan you have planned.

In the ideal case, which rarely happens, all three take place. The most common scenario is that the monthly payment is lowered. This has several advantages to the debt ridden. When the payment is lowered, you have a much higher chance of being able to pay it consistently.

That helps prevent piling more debt (interest and late charges) onto existing debt. You also have a much more relaxed frame of mind, knowing you can meet the monthly debt obligation without sacrificing other needed items.

The risk is that if the payment is too low, some of the psychological factors that led to excessive debt in the first place can rise again. Thinking you have lots to spare can cause you to relax too much too soon. Continual worry is not healthy, commitment and concern are - if your goal is to become debt free.

Unfortunately, many plans lower that payment by extending the life of the loan long enough to cover paying off the entire original amount owed. That leads to more interest paid over the long term. That's fair to the lender, since you do owe the money. But some will settle for less if they have good reason to believe they will actually get repaid. Try to negotiate a lower settlement, then consistently make the agreed on payments every month.

Losing debt is like losing weight. Consistency, and a commitment to lower it, and keep it lowered, is the key to long-term success.