When you take out a secured debt consolidation loan, you are converting your unsecured debts into a debt that is securitised by your home or other property.

Should you fail to make the loan repayments, it is not just your credit score that is at risk. You could lose your home.

For this reason, a debt consolidation loan is not recommended for anyone who has concerns about their income or job security.

Consider reviewing your financial situation with a money management expert. There may be alternatives to debt consolidation, including money management methods that improve cash flow, get creditors off your back and reduce debt stress quickly.

With mortgage interest rates at nearly record-low levels, it may be tempting to consolidate all of your debts into your mortgage to get a lower interest rate and smaller monthly installment. But when it comes to loan affordability, the interest rate is only one factor.

Another important factor is the loan term. The loan term describes the amount of time over which the loan repayments will eventually pay off the loan principal in full. Mortgage loans usually have terms ranging from 15 to 25 years.

Given that loan interest charges are calculated daily, as the term of the loan increases so does the amount of interest you pay. This is due to the effect of compounding interest where interest charges are calculated on the initial principal plus accumulated interest over the term of the loan.

People usually become interested in debt consolidation because their existing debt repayments are messy, unmanageable or too expensive.

Perhaps your credit card balance has snowballed or you’ve fallen behind in bills or your income situation has changed. The fact is that nobody gets into financial problems on purpose. In most cases, money troubles are caused by life changes — divorce, illness, job loss, a business failure. Even positive events, such as having a baby, can result in money worries.

That’s why it pays to take the time to understand your financial situation fully before jumping into a new loan.

There are no one-size-fits-all solutions when it comes to money issues and a good debt management strategy will take into account your specific situation, goals and priorities.

The first step is to create a long-range budget that takes into account all of your expenses, debts and income over a 12-month period.

This is a great way to get to the bottom of your finances and explore all of your options.

If a debt consolidation loan is right for you, your budget will reveal how much you can afford to pay off and how quickly. If not, your budget can be used to test alternative strategies.