A debt consolidation plan is a strategy that involves taking out a new loan to pay off credit card and other balances with higher interest rates. The goal is to reduce your cumulative interest payments and simplify budgeting by paying off the debt in a shorter timeframe. But there are a variety of debt consolidation options, and each one comes with pros and cons. Before you make a decision, be sure to weigh the options carefully and consider each lender’s interest rates, fees, minimum payment amount and loan terms.

Debt consolidation loans typically have lower interest rates than the individual balances they’re replacing, but they often come with their own set of fees. These can add up quickly, and it’s important to factor them into your calculations when determining whether a debt consolidation loan is right for you.

In addition, if you miss a single payment on a debt consolidation loan, it may impact your credit scores. This could make it more difficult to obtain a new loan with favorable interest rates, which will ultimately drive up your repayment costs.

Some debt consolidation programs don’t require a loan, but instead focus on creating an affordable budget to help you overcome your financial problems. This is known as debt management and is offered by nonprofit credit counseling agencies. Their certified counselors will review your budget and income, help you create an affordable monthly payment and offer free advice on which debt relief program will eliminate your debt in a reasonable timeframe.

One advantage of a debt management program is that it can be used to pay off credit card debt, auto debt and other types of outstanding debt. However, the program doesn’t necessarily provide immediate debt relief and you will need to repay your creditors within 3-5 years.

Another downside of debt management is that it does not address the underlying issues that led you into debt in the first place, such as overspending or failing to save for emergencies. Unless you’re able to change these habits, it’s likely that you will end up in debt again in the future. Before you choose a debt management program or any other debt-relief option, be sure to research the companies you’re considering and find one that is trusted by the Consumer Financial Protection Bureau. You also should check the company’s track record, online reviews and accreditation. By following these tips, you can be sure that the debt-relief solution you select will actually improve your finances.