Under the right circumstances, taking a personal loan for debt consolidation can make a lot of sense. However, what you do after taking the loan is just as important as whether or not you take the loan in the first place. Handled poorly — or if the situation isn’t carefully thought through — this approach could actually leave you in worse shape.

What’s Your Situation?

Generally speaking, using a personal loan to consolidate and pay off debt typically works best when you have a moderate number of obligations. However, it should also be enough to require five years or so to pay off.

Moreover, most financial experts agree six months to a year’s worth of debt doesn’t make sense to consolidate.

On the other hand, consolidation is likely to be more of a hindrance than a help if you’re in a situation in which you have no idea where the end of the tunnel is. Using the services of a debt professional in such instances is a smart move to help you figure out the most expedient means of dealing with it.

You’ll also need a pretty strong credit score to get an interest rate low enough to realize significant savings.

Do the Math

Learn everything you can about the terms of the loan before you sign anything. What’s the interest rate? How much time do you have to pay it off? What will the monthly payment be? Are any fees associated with the loan?

Next, compare the consolidation loan to the debt load you’re considering.

What’s your average interest rate? How much is the combined balance? What is the total amount of the monthly payments when you add all of the accounts together? How long would it take to pay all of the debts off if you used the snowball method? What are the total costs you’d incur doing things this way?

How do these findings compare to what you could accomplish with the consolidation loan? If the loan shows a definite advantage, the next thing you need to consider is what you’ll do after you take the loan.

Your Post-Loan Behavior Is Crucial Too

Right off the top, consolidating your debt into a personal loan doesn’t make you debt-free. It just means you have fewer individual obligations to service each month.

Too many people who get consolidation loans, relieved by the lower payments, begin spending as if they have no debt. That’s a mistake. A better move would be to continue applying the same amount of cash in total to the consolidation loan as you were paying when you were addressing the accounts individually.

This will help you pay off the consolidation loan sooner.

The professionals at Consolidation Plus also caution borrowers to avoid using credit cards until the loan is paid off. Having a stack of zero-balance credit cards in hand can tempt you into charging again. You’ll soon have a bunch of credit card bills to go along with your monthly personal loan payment if you don’t change your spending habits.

Just Be Careful To…

Taking a personal loan for debt consolidation can make sense if everything lines up correctly.

1. Make sure you’re clear regarding the terms of the loan.

2. Be certain consolidation is the most favorable approach.

3. Devise a solid plan to pay it back as quickly as possible.

4. Rein in your spending to avoid going deeper into debt.

You’re most likely to come out ahead if you nail these four items.