A debt consolidation loan is one of several solutions that can help you become debt-free. The lending agency gives you one loan to pay off all your debt. If you are employed and have a reasonable credit history, you may be able to get an unsecured debt consolidation loan. However, if your credit history is poor, lenders typically prefer to offer you a secured loan, using your home as collateral.

As with any other financial decision, a debt consolidation loan works best when you know what you are getting into. It is best to use a reliable lending agency that doesn't promise instant, and unrealistic, debt solutions. Check the lending agency's credentials, claims and practices carefully before giving it your business. The loan repayments that you are asked to make, and the loan interest rate, should both be lower than what you were paying overall to service your various debts before the loan. While small fees are the norm, be wary of agencies asking for large commissions, or of those who have not been in business very long. A debt consolidation loan should have no adverse effect on your credit rating. If the lending agency cannot reassure you on this front, look for on

e that can. And remember that if you take a loan with your home as collateral and default, you stand to lose your home.

It is always wise to explore all your debt consolidation options. A widely used rule of thumb in debt consolidation is that you should be out of debt in three to six years. If you have a very large amount of debt, this may translate into longer repayment terms and higher interest rates on your loan. In this case, there are other debt consolidation solutions that may suit your needs better.

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