Debt consolidation is a general statement that covers a variety of methods. The basic premise is always the same, though, you take multiple debts and bring them all together, either as a loan, a credit card balance transfer, balance transfer, or something else.

The big benefit of debt consolidation is that all of those accounts — with their different payment amounts, different due dates, and different interest rates — become one payment (ideally with a lower interest rate). As with any credit product, though, the better your credit score, the better the terms you’ll be able to score. If your credit’s a bit subpar, you may have a hard time qualifying for something that actually helps you save money.

Consolidating your debt can be a great way to simplify your finances and bring your month-to-month spending under control.

But there are many forms of debt consolidation, and each method comes with certain risks. So before deciding, here are all the things you need to consider.

To consolidate your debt is to bring multiple debts together into one, single payment.

The benefit of debt consolidation is usually some combination of the following:

• Fewer monthly payments to manage
• Lower total interest charges
• Smaller total monthly payment
• Lower total cost to repay all debts

In other words, debt consolidation should make your life easier and save you money. Of course, that’s not a guarantee.

DEBT CONSOLIDATION OPTIONS

There are multiple ways to consolidate your debts. Here are what might be considered the four most common methods:

UNSECURED CONSOLIDATION LOAN

You can take out a unsecured loan from your financial institution of choice and use the funds to repay your outstanding debts. You’ll then be repaying the loan each month instead of your old debts.

LOAN AGAINST PROPERTY (LAP) – HOME EQUITY LOAN

If you have equity in your home, you can take out a loan against that equity and use the funds to repay your debts.

BALANCE TRANSFER – HOME LOAN REFINANCE

 By taking out an entirely new home loan on your home, you can repay your old home loan and other unsecured debts, leaving you with only the new home loan.