It is so easy to get into debt today when the average American has five to nine credit cards which are used for everyday living expenses. All of those charges accumulate and the monthly bills get bigger and bigger. Eventually, the consumer's income doesn't cover all of the monthly bills. Throughout the month the consumer has bills arriving with different due dates and different interest rates and different finance charges and penalties. Leaving one bill go for a month in order to pay a different bill results in finance charges or penalties. The consumer who is going into debt deeper and deeper begins to look for a solution to his problems.

The consumer may benefit from debt consolidation. Debt consolidation is when the consumer borrows money and uses the money to pay off his bills. Then he has one monthly payment at one rate of interest to pay, instead of bills straggling in throughout the month with different due dates and different interest rates. One way of doing this is with a home equity loan. The consumer has to be a homeowner in order to qualify for a home equity loan because the house is used as collateral for the loan. The amount of the loan is determined by the amount of equity which the homeowner has. The borrower should be aware of something when he obtains a home equity loan for purposes of debt consolidation. Most consumer debt is short-term unsecured debt, like credit cards are. It is unsecured because there is no collateral. A home equity loan is a long-term secured debt, because the house is used as collateral. This method of debt consolidation results in short-term unsecured debt being converted into long-term secured debt. In case of default, the borrower can lose his home.

Debt consolidation may also be possible for those who are not homeowners. It is possible to obtain an unsecured personal loan to use for debt consolidation purposes. These are referred to unsecured debt consolidation loans. In this situation, the consumer is not converting short-term unsecured debt into long-term secured debt as with the home equity loan. The consumer doesn't have any collateral and has to find a lending entity that will make this kind of loan. The consumer can look in the phonebook or better yet on the internet. There are many lending companies that offer these kinds of loans. Because they are unsecured forms of lending, the consumer can expect a higher rate of interest and a shorter term. There are also credit companies that act as a go between or a finder of credit for people. The consumer completes an online application. The credit company evaluates the application and if approved, finds a lender for the consumer.

A debt consolidation loan solves the problem of a myriad of bills with different terms coming in over the month. It makes the situation easier for the consumer because he has one loan with one interest rate. Whether it is secured or unsecured, the loan funds are used for debt consolidation.