Many credit companies advocate the use of debt consolidation loans as being the best possible debt reduction solution for their clients.
You simply refinance your existing credit card or personal loan balances over to the new debt consolidation loan and close out the old accounts.
This leaves you with one loan to repay instead of several.
As the interest rate charged on consolidation loans is usually much lower than that charged on credit cards, you're paying less interest each month and your repayments may be reduced as a result.
If you're willing to remain disciplined and make a few extra repayments off your consolidation loan or if you're willing to pay more than just the minimum repayment each month, coupled with the promise of securing no further debt, then you stand a great chance of getting out of debt for good very quickly.
Unfortunately some people simply don't have the discipline to benefit from debt consolidation loans in the way they were intended.
The easy fix of getting rid of all the previous balances into a new loan might fix the repayment issues for these people, but it won't fix the bad spending habits that got them into financial trouble in the first place.
It has been reported that many people who utilize a debt consolidation loan in order to get ahead financially have actively signed for at least two new credit cards within the next six months.
So while debt consolidation loans can be an effective way to reduce debt when handled properly, they can also be nothing more than a temporary band-aid fix for people not willing to learn new financial habits to keep them from repeating the same mistake.