A debt reduction loan (also known as a debt consolidation loan) allows you to merge all your debts into one and make only one monthly payment. You may usually get a lower interest rate and save some money this way. Taking out a loan to pay off all past payments and existing debt will remove the negative records from your credit report, and you will have to make one payment to the lender each month.

What are the signs that a debt consolidation loan is right for you? It all depends on the circumstances. Keep in mind that your debt has not been lowered in any way; you have combined them all into one payment. The amount of your payment is decided by the lending institution’s interest rate and the term of the loan.

A debt consolidation loan will not get you out of debt any faster, but if you have the determination and ability to pay off the debt in one payment, the time it takes to do so will be far less stressful. Make sure you don’t get into any extra debt after you’ve consolidated your current bills. Remove those high-interest credit cards from your wallet and never use them again. If you continue to use them, the situation will become worse. You’re attempting to improve, not exacerbate, your condition.

Keep in mind that when you take out a debt consolidation loan from a lender, you are exchanging unsecured debt for secured debt. This means that the debt you incurred by using a credit card is unsecured debt, with no recourse for the credit card issuers to collect the money owing to them if you do not make your payments on time.

Secured debt is backed by collateral, and if you don’t pay your payments on time, the lending institution can and will take the asset you put up as security. If that object is your home, you will almost be seeking a new place to live. If you merge your debts and get a secured loan from a lender, do everything you can to keep your payments on track.

If your debt is minor and you’ve had a long relationship with your lender, inquire about an unsecured consolidation loan. Unsecured consolidation loans are given in lower amounts and may be the best alternative if you have minimal debt and no assets to use as collateral. An unsecured debt reduction loan will have a higher interest rate and be more difficult to get than a secured loan, but because the amount borrowed is smaller, it will take less time to return, thus it is a smart trade-off with nothing to lose.