Imagine this, you pay $250 a week on your mortgage, $50 a week on your car loan, $30 a week on a personal loan you took out to buy a new bike and another $150 to pay for a plasma television you bought a year ago. Your total payments cost you $480 per week. Some guy comes along and says he can put all those loans into a simple package for you and it will only cost you $400/week. You just made $80 cash in hand every week by taking out what is known as a debt consolidation loan.

Debt consolidation loans are nothing new, but there are a few new twists on them you should be aware of before you go down this track.

Pros:

• You know exactly how much you owe on everything at any given time
• You pay less per week

Cons:

• One person controls all your debt
• You may end up paying more overall for the loan

Let's look at the positives first. Knowing how much you owe can be a good incentive to work towards paying it off. When you owe $5000 over here and $10000 over there and $190000 to the bank over here, it becomes a little overwhelming. Ever letter that arrives in the post seems to be another person asking you for money. Consolidating that debt into a single place is a fantastic way of getting on top of this. Secondly, your weekly payments are likely to be reduced overall from what you would otherwise be paying and you always know the interest rate.

On the negative side one person controls your financial wellbeing. Check the terms of the loan carefully. It may look like a good deal now, but can the hike the interest from 2% to 15% on the first renewal date? It may seem unlikely - but it's worth checking because if it does happen you will be in HUGE trouble. Secondly, the total you pay may end up being more than the total of all your other loans. Mortgages tend to be long term loans, but most others will be over a period of a few years. At least once they are paid they are gone, whereas if you consolidate your debts into one loan you are going to be paying it for a long time.

A debt consolidation loan is a fantastic way of getting your money matters in order, but make sure you read all the fine print. Find the right loan not just any loan, and then to speed things up increase your income and make voluntary payments to get rid of your debt faster.