If you're thinking of taking up one of many credit card or personal loan offers that you see on the telly, in the newspapers or hear on the radio, consider the following :

An individual loan that may merge your debts into one easy monthly or fortnightly payment sounds excellent and appears to be a great offer.

When we find a special deal or an offer that's's 'too good to be true' our natural instinct is to ask 'what's the catch'. However with consolidation loans folk seem to leave their natural instinct at home.

Regularly this is due to the fact that we are blinded by 2 facts :

1. We look at the loan amount and
2. The monthly repayment.

If these 2 facts combined are better than what we are at present paying on our loans we instantly believe we are securing a superior deal by consolidating our debt.

While these 2 points are vitally important they are not everything you want to consider when deciding if bill consolidation loans are best for you. Don't let the loan company make you believe that because you are able to afford the repayment amount and this amount is less than your current minimum debt payment, that this is all you want to know referring to your consolidation loan.

When you look at re-paying your consolidation loan we are saying to ourselves, one monthly re-payment is far better than multiple monthly payments on multiple debts. But we need to look at the exercise in its entirety. Breakdown each debt that's going into the consolidation loan. That is, how much is owed, what's the interest rate, what's the minimum re-payment and how long will it take to pay off.

Add all your liabilities together and compare it to your consolidation loan details. Mostly you can realize that you are better off with a consolidation loan however it is worth doing the exercise to completely appreciate how your circumstances are going to switch in terms of regular expenditure towards your obligations under a consolidation loan.

Once you have come this far, look at the type of IR that's been offered, is it a variable rate or a fixed rate? Remember if it is variable and interest rates rise during the term of your consolidation loan, your re-payments will also rise. Always make sure that the IR on your new consolidation loan is lower than your current obligations. Also look at what happens if you make extra payments towards your consolidation loan. Say you get a pay rise or an unexpected cash bonus and you choose to pay your consolidation loan out faster, what are the penalties?

Many banks have a fee attached to early pay out of consolidation loans. This is not always a pathetic as some people are happy to pay the loan to the end making the mandatory regular payment. When you are considering consolidate my student loans look at the 'fee schedule' ( each loan offer should have one ). The charge schedule tells you about all the other costs that may be related to your consolidation loan. Stuff like account keeping costs and broker's commission.

Each consolidation loan incorporates fees and this isn't necessarily a bad thing but you need to make sure that you consider the costs in your standard payment. That's, if the account keeping fees are $600 and are figured out separate to your regular payment and your loan period is sixty month's your standard payment is truly an extra $10.

We highly recommend if you're consolidating store cards and credit cards into one consolidation loan that you cancel those cards when your consolidation loan is approved. Once your consolidation loan is established your store and Visa card limits will be most likely revived. Don't risk enticement by leaving them active with credit available, cancel the cards! By consolidating your obligations you may very well have started on the path to be 'debt free'.