Most people automatically assume debt consolidation is the way to go, but that’s not always the case. Each person needs to evaluate the effect debt consolidation will have on his or her individual finances. Here are a few of the pros and cons to help you make an informed decision.

Pro: Debt Consolidation Can Reduce the Amount of Your Monthly Payment. Consolidating all of your debts into one loan may very well reduce the amount of your monthly payment. You could have one larger payment that is less than the total of the other smaller payments.

Pro: Fewer Bills to Keep Track Of. It’s easier to remember to make one payment on time than it is to keep track of all the due dates for a bunch of smaller bills.

Pro: Fewer Late Fees
With one payment to make instead of multiple payments, the chances are you won’t be making your payments late. But even if you are a few days late making the one payment, service charges for one late payment is a lot less expensive than service charges for multiple late payments.

Pro: You May Get a Lower Interest Rate. If you consolidate debts using equity in your home, you can usually get a lower interest rate on a home mortgage than you can for other types of loans such as auto, motorcycle, recreational vehicles, or unsecured notes.

Con: You Could End Up Paying More in the Long Run
If you consolidate your debts into one loan and the amount of the interest charged on that loan is higher than some of your previous debts—say, for instance, you had a balance on a loan that didn’t charge any interest for the first year—you could end up paying higher overall interest for the combined debt. Similarly, if the consolidated debt is stretched out over a longer timeframe than the initial debts were—in order to make the monthly payments lower and more manageable, for instance—you may end up paying more in interest charges over the lifetime of the loan.

Con: You End Up Paying Long Term For What Should Be Short-Term Debt. If you purchase clothing or groceries and put it on your credit card, then consolidate those credit card debts into a longer-term loan, you could end up paying on items far beyond the time when they have lost their value. For example, you could end up paying for the groceries you ate last week for the next five years.

Con: Tendency To Incur More Short-Term Debts Quickly After Consolidating. Though most people consolidate their debts with good intentions, they frequently repeat the same mistakes that got them into debt in the first place. They start charging things on their credit cards or make purchases they really cannot afford, and soon they are wracking up new bills to go along with the old bills they must pay off. But because they are making only one monthly payment on the older debt, they reason that they can afford another payment. It’s a catch-22 and soon results in more feelings of drowning in debt, creating a vicious cycle until you no longer have the option to consolidate.

Evaluate Your Individual Situation – Calculate the Costs
The only way to really determine whether consolidating debt is the right thing for you to do is to consider your individual circumstances such as your monthly income compared to your total monthly expenditures and also the actual cost of financing your debt as individual debts versus the total cost of financing your debt as a consolidated loan.

In many cases, if you are paying high interest rates on consumer credit card debt, it may be more advantageous to consolidate your debts if you can use equity in your home to negotiate a better interest rate on that debt amount.

On the other hand, it is not always advisable to tie in debt for unsecured purchases with your home—which is usually your biggest asset. Only you can decide what will work best for you and your family.