Debt consolidation mortgages are one of the main methods that debtors use to manage their financial affairs and involves swapping all your individual debts for one large debt and hence one monthly repayment.
By consolidating your debts, you will end up with one larger debt which can be repaid over a longer period of time and in most cases, at a rate which is lower than the rate(s) previously being paid on the individual debts.
Once you have repaid your debts, it is tempting to take out more credit, which should be avoided if possible.
If you are considering a debt consolidation loan, it is vitally important that you calculate the exact costs of your current loans. Beware - many debt consolidation companies sell their product on the basis of the lower monthly payments; however, when you consider the extended duration of the new loan, you may find that the total costs are far in excess of what you would otherwise have paid.
There are often extended and onerous terms attached to consolidated loans which make any early repayments financially unviable. In addition, large penalties can be imposed if you miss a payment and this should be borne in mind when considering this type of loan.