This is an unbiased and unsponsored article that will explain how to consolidate loans. After reading this, you will understand what a consolidation loan is, what advantages a consolidation loan has and what disadvantages this type of personal loan can incur. How to consolidate loans will provide you with a clear list of how to reduce your debt by combining your loans into a single, low interest, low payment, easy to manage loan.

Consolidation Debt is a type of debt that is incurred by a loan that combines money from a variety of sources into a single, larger loan. Often, these loans have lower interest rates and longer repayment terms. Consolidation debt is typically secured with something that has tangible value such as a house, a car, property, bonds, or other investments.

If you would like to reduce your credit card payments, learning how to consolidate your loans can be a fast, easy solution to an often stressful problem.

An easy to follow budget is important not only to keep you finances on track, but it is a key first step to learning how to consolidate loans. Lenders will ask you what your expenses are and what income you have. Having this information on hand along with a clear understanding of your situation expedites the process and can show lenders that you're serious about managing your debt.

To review your personal financial situation, complete the following steps:

1. Collect all of your bills (expense statements) and all of your pay stubs (income statements)
2. Create a simple spreadsheet on your computer or using a piece of paper and a pencil, create 3 columns titled: Description, Income and Expenses.
3. Record each income that you have and each bill that you pay.
4. Note to record only bills that you pay regularly.

StackBacks has created a detailed, easy to follow budgeting process that they call the StackBacks Automated Budget System. This is a simple budget that does not require regularly accounting for every income and expense, but rather collecting regular income and expenses into groups.http://stackbacks.com/blog/stackbacks-automated-budget-system/

Beyond gathering basic information, the StackBacks system works by using two free checking accounts. All of your income is deposited into your "bills" account and your regular monthly expenses (car, mortgage, phone, etc) are withdrawn automatically from that account. The remaining money is transferred into your "personal" account from which you spend money on irregular expenses such as gas, dinner out, groceries, etc. This system helps to ensure that your bills are paid on-time and that you have a clear, automatic line between expenses and income.http://stackbacks.com/blog/stackbacks-automated-budget-system/

The first step to understanding how a consolidation loan can help you is to review common questions that people frequently have about how to consolidate a loan:

What is a consolidation loan? Ratemarketplace.com defines a consolidation loan as a loan that "combines several different debts to create one monthly payment, typically more affordable than the sum of individual loans and with a lower interest rate overall."http://www.ratemarketplace.com/rates/glossary.html#c

What are the advantages and disadvantages of consolidation loans? The University of Missouri lists the following advantages of loan consolidation:

1. Lower Monthly Payments by choosing a repayment plan with a longer payment period.
2. Many people qualify for low fixed interest rate loans or extended grace periods.

The University of Missouri also lists the following disadvantages of loan consolidation:

1. Lower payments and longer terms result in one paying more money in interest over the term of the loan.
2. Consolidation loans traditionally have fewer payment deferment options.
3. Existing debts such as those involved in loan forgiveness programs or those near the end of their term should not be combined into a consolidated loan.

After you understand the basic concepts of what a consolidation loan is and what the advantages and disadvantages are, you're ready to talk to financial institutions, lending providers and credit companies.

1. Ensure that you have a clear understanding of your personal and family financial situation (step 1).

2. Ensure that you have an understanding of what a consolidation loan is, how it will effect your credit, what options you have and importantly that you will be able to pay your consolidation loan on time, every time, without question. Remember that learning as much as you can is important. Do not rely on a single source of information (including this article) and seek information from a variety of trusted sources.

3. Next, begin by calling your current credit card companies and unsecured loan (line of credit, etc) providers. Tell them that you are thinking about consolidating your debt into a single loan but would like to first evaluate if it makes financial sense. Ask each one of them vigorously to lower your interest rate so that you do not have to seek a consolidation loan.

4. Talk to your financial institution and other trusted loan providers. Ensure that you take the time to listen to the products and services that they have available and carefully evaluate each offer. Never feel pressured to sign a document or commit to anything before carefully evaluating each and every item on the contracts and fine print associated with deals and offers.

5. Think long term. Paying fees for points or reward programs or accepting introductory term credit cards can dilute a consolidation loan. Carefully calculate the real cost and benefit of the consolidation loan that you are asking for.