The appeal of debt consolidation is simple. You can combine all of your different payments into a single, lower payment, and get out of debt. If you listen to the advertisements on television and online, the results are faster, easier, and worry-free. If you're facing a large debt, this may sound like a great idea; however, the truth is that the overall cost may not be worth the short-term benefit.

Options for Debt Consolidation

The purpose of debt consolidation is to roll all of your existing debts, with their varied payments and interest rates, into one large loan with one payment (and hopefully, one lower interest rate), allowing you to get rid of your debt faster than you otherwise would. As it stands right now, several options exist for debt consolidation. Among the most popular are:

Debt consolidation companies: These companies promise to negotiate for lower interest rates on your debts, extend your repayment schedule, and prioritize your debt, paying off higher interest debts first. The company takes over the task of paying your various creditors, and in return, receives a percentage of the debt paid, or a monthly fee, depending on the company. Even if your interest rates were lowered, you may end up paying more in total debt over time because of the fees associated with the company and the extension of the repayment schedule.

Home equity loans: If you are a homeowner, and have equity built in your home, you can borrow against the equity at a relatively low interest rate. One benefit is that the interest paid on a home equity loan is tax deductible. Most of the time, a borrower must pay an origination fee, and the loan typically carries a 15- to 30-year term. Because you are using your home as collateral, you must be sure you can make the payments, or you risk losing your home.

Personal loans: This type of unsecured loan may be available to you if you have good credit. The interest rates on personal loans are typically higher than those on home equity loans; however, they may be lower than the interest on your credit cards.

How to Get Out of Debt

If you're considering debt consolidation, the first step you need to take is to stop using credit, and establish a realistic budget. Although there are many ways to consolidate your debt, establishing a budget may allow you to determine that you are capable of reducing your debt all on your own. In fact, you may be able take the same steps the debt consolidation companies do to get out of debt yourself, and avoid all of the fees.

Request a lower interest rate: Negotiate with your creditors, call customer service, and explain your situation. Don't take no for an answer.

Extend your repayment schedule: Ask for lower monthly payments. Prioritize your debt: Plan to put the most money toward the debt with the highest interest rate first. Keep in mind that your goal is to get out of debt. As you pay down the balances of your existing debts, or consolidate your debts into a new loan, be sure to avoid using the available credit you now have.

You might also want to consider contacting a financial advisor to help you design a strategy for debt relief. Although there are costs associated with hiring a financial professional, he or she can also begin helping you establish an investment portfolio or retirement package.