For many consumers, consolidating debt is a smart move. Consolidating your debt, or a portion of it, means finding a lender who will pay off some (or all) of your current debt obligations and in return you will pay that lender one monthly payment rather than the several you were paying before.

On the surface this seems like a grand idea, mostly because the consumer ends up with (usually) a smaller bill at the end of the end of the month. For many consumers it more convenient to write out one check to cover many bills than it is to write out several. However, while there are many good benefits to a debt consolidation loan, there are also some possible drawbacks.

Perhaps the biggest drawback in the current market is simply finding a lender to work with. With the recent problems in the housing market, many lenders who would once happily take on debt consolidation loans are now being more stringent with their lending practices. What this can mean to some people is that while they may have been able to qualify for a consolidation loan a year ago, they may not be able to qualify for that same loan now.

While it is true that banks and credit unions often offer debt consolidation loans, some consumers, especially those who may have some spotty credit issues, may find it more beneficial to approach one of the many companies that only deal in debt consolidation loans. An excellent way to identify these companies is to do an online search using “debt consolidation loans” as your key words.

If you do this search through Google or Yahoo you will find that there are thousands of possible choices. In order to save time and to get some of the most recent information, you may also want to check out some of the consumer advocate sites. Places such as Consumer Reports will often have done a lot of the work for you and help guide you toward companies that are reliable and honest.

Consumers should understand that debt consolidation is not debt forgiveness. Debt consolidation is also separate from debt repair. The terms may sound similar at times, but these are all different markets.

A debt management programme is designed to consolidate debt with the agreement of the lenders. This option is designed to reduce monthly repayments to an affordable level while still reduncing the debt.

A step on from debt management is the use of an IVA. An IVA is a legal route taken by consumers who have more than £15,000 in debt and cannot afford to repay them.

When shopping for a debt consolidation lender, make sure that you do your homework. These companies are not all equal. Things to look out for include any request for advance fees. This should be a warning sign to you. Most reliable companies do not charge advance fees. If they do, they are usually small and the company will detail for you exactly what they are going to be used for. Another important issue to investigate carefully is the interest rate payback scheme. Some companies may offer you a very tempting introductory rate, but make sure that you know what the rate will increase to later on and how that increase will affect your monthly payments.

Working with debt consolidation companies can truly be useful for some consumers, but do make sure that you are getting the best deal possible. It makes little sense to sign up with a company only to find that you are not much better off than you were beforehand.