The simple answer is “it depends”
If you choose the right debt consolidation loan, you’ll have one monthly payment with very low interest rate compared to your ridiculously high interest rate on your unpaid debts. A great debt consolidation loan will have low interest rate plus flexible repayment terms with no prepayment penalty clause attached. In this case, a debt consolidation loan is a good idea.
However, there are the traps, just like all other debt related programs. If you fall into one, you will end up paying more and owning even more debt. You just need to be smart about this. If you choose a wrong consolidation loan, you will end up paying even more money than if you had just paid your bills at the higher interest rates.
Another common trap with some of the debt consolidation offers is the long repayment schedule. Of course the terms depends on the amount of your debt refinanced, but it isn’t like your student loan. If you are not careful, you will own the debt for decades. Don’t do this.
Lastly, if you are not careful with your new spending habits, you will not only fail to payoff your previous consolidation loan, but accumulate new debts in no time. Keep reminding yourself that debt consolidation doesn’t mean your debts are gone. Many of us fall into that trap; going back to our old spending habits.
So is debt consolidation a good idea? in my opinion, it is; only if it is carefully chosen. Don’t get lured by junk mail offers. Just go straight to your bank, preferably a local credit union, for your consolidation loan.