Debt consolidation can seem like an appealing way to make managing your debt less complicated, but it comes with many risks, and it's not for everyone. Before you take out a loan, make sure that it will benefit you in the long run and that you are prepared to follow through.

Where Is Your Debt?

Debt consolidation works best when you have unsecured debt, like credit card debt and small loans. Unsecure debt is attainable without leaving any assets as collateral, which means that a creditor bases your ability to pay back debt on your credit score. It's easier to consolidate debt that isn't connected to any assets, so if you've got multiple credit cards with high interest, or a small loan or three, these are the easiest to wrap up into one payment.

What Loans Do You Have Access To?

Being in debt doesn't necessarily mean you have bad credit; you may have made most of your payments on time, which is a good sign. If your credit is decent, you'll have access to loans with lower interest rates. If you've been looking at loans and the interest rates are comparable to what you're paying already, it's not worth it.

Is It the Best Option?

There are multiple ways to consolidate debt, and taking out a personal loan is just one of them. Another method you can use is to apply for a credit card that has zero interest for a certain amount of time, transfer the balance from another card to the new card, then close the old account. This might not be enough to take care of all your debt, but it can essentially knock off the interest completely on one or two cards' balances, apart from the transfer fee. Explore different options before you jump straight to a loan, because zero-interest options can offer some breathing room if handled responsibly.

Would It Save Money Long Term?

Rolling all your debt into one payment sounds good, but if you're still paying roughly the same amount, you're essentially only changing what days of the month you need to pay. Figure out your total balance between all your sources of debt, then calculate how much you're paying each month. Find a loan calculator and apply that total balance, then see how much you would be paying total at varying interest rates. If it's a better deal, then you can consider it, but you should still shop around for the lowest possible interest rate. Also be wary of hidden fees and changing interest rates.

Can You Follow Through?

One reason many debt consolidations fail is because after multiple credit cards are suddenly cleared of debt, many users cannot resist using them again, which only puts them further in debt. One good way to ensure you don't fall prey to this trap is to close your credit card accounts after you have paid off their balances, leaving only one card with a low credit limit in the case of emergencies.

Either way, if you're going to consolidate your debt, you need to be in it for the long haul. If you think you may need help, talk to a non-profit credit counselor or certified financial planner to ask for options and assistance.