Are your debts getting you down? We live in a world where it's too easy to collect credit cards and HPs, until one day you wake up and realise you're facing Mt Debt.

Paying down tens of thousands of dollars of borrowing can feel like digging a hole with a spoon.

The words "debt consolidation loan" give me the heebee-jeebies. Yet debt consolidation can be a saviour for indebted Kiwis.

These loans are classic Jekyll and Hyde. When they're good, they're really good. When they're bad, they're a fast track to bankruptcy.

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In simple terms, a debt consolidation loan combines multiple debts such as HP, credit card debt and personal loans into one big loan.

The advantage is that you have one single payment a month and can budget more easily.

You may get a lower interest rate. Or the debt is spread over a longer period, giving you lower monthly outgoings - although you pay more interest in the long run.

It's increasingly common for home owners to consolidate their consumer spending on to the mortgage when it gets a bit out of control. For renters, unsecured debt consolidation loans are available from banks, building societies, credit unions, and finance companies.

NZCU Auckland general manager Rob Collins says credit unions like his used to see Kiwis wanting to consolidate debt of about $30,000. But lately customers are walking into branches having hit a "tipping point" of $50,000-$60,000.

If you need a debt consolidation loan and have a mortgage use a broker who can shop around the banks for you. Or if you don't own your own home try a credit union or other not-for-profit that has the customer at heart, says Jeff Royle, mortgage broker at iLender.

The good

Consolidating high-interest loans on to a lower rate really can save some people's bacon. Collins says many of the loans NZCU Auckland refinances are on high-interest rates from the likes of Gem Finance, Q Card and Harmoney.

Rolling the debt into a lower interest loan or a mortgage is in theory a sensible move and reduces the interest from, say, 19.95 per cent on a credit card to 5.80 per cent on a floating mortgage rate, or about 12.95 per cent at a credit union. This gives Kiwis who have built up a one-time-only debt breathing space to pay it down.

The bad

Debt consolidation is not always a magic bullet. I have a rule of thumb with personal finance: "he who advertises most on prime-time TV has the worst product".

That can be the case with debt consolidation where fees for the loan add to the debt and can compound problems by increasing the monthly payments. Sometimes mainstream lenders can't offer credit.

Harmoney's D, E and F grade borrowers, who pay from 24.41 per cent to 39.99 per cent interest, are just too risky for a credit union to take on, Collins says.

Even those who consolidate their debt on to their mortgage don't really realise the totality of what they're paying, says Royle. Many simply add the debt to their 30-year mortgage, meaning they pay more in interest in the long run than they would have at the higher credit card rates over three or five years.

It's okay to consolidate on to a mortgage, says Royle, if the consumer debt part of the home loan is paid off over five years, not 30.

The ugly

One of the reasons I feel two ways about debt consolidation loans is there is BIG money to be made by lenders in debt consolidation, which means it can attract the less-than-savoury lenders at the fringes.

Although sold as a panacea to debt woes, debt consolidation compounds some Kiwis' financial distress.

Many people who consolidate debt don't learn and build up more store/credit card debt within months, says Royle. The reality is it simply enables these "recidivist" borrowers to keep spending.

When the loan is loaded on to the house it's easy to forget that you spent your way into tens of thousands of dollars of debt. It just becomes "the mortgage".

There are alternatives to debt consolidation. One is to keep switching the debt to a new credit card every 6-12 months to take advantage of introductory rates, which range between 0-6 per cent for the high street banks. But this only works if you leave the card at home and don't use it for new spending.

It's a really good idea to get budgeting advice at the same time as consolidating debt.

Collins notes that in most cases the debt isn't racked up by spending on essentials such as food and living costs. Most often it has been accumulated on non-essential consumer goods such as electronics and overseas holidays.

"It's not unusual for people to have two overseas holidays a year [on credit]," he says.

Like dieting, many people fail and fall back into old habits.