You may have heard the term "debt consolidation" at one time or another, but what exactly is it, and is it right for you?

"Debt consolidation is essentially taking multiple debts and putting them together so you have just one monthly payment to make," says Daniel Lawler, a Branch Team Leader for Regions Bank. Ideally, that consolidated payment will lower your monthly payment amount and reduce your interest expense. "If you're struggling to pay your bills, spread too thin, or you don't have the necessary cash flow, it may be a good time to consider debt consolidation."

Multiple Debt Consolidation Options

There are a variety of ways to go about consolidating your debt.

If you have equity in your home — meaning you owe less than it's worth — a home equity loan or line of credit can be a good way to consolidate your debt.

"Home equity loans and lines of credit generally have lower interest rates than personal, unsecured loans, and most credit cards," Lawler says. "You can take out enough to pay off all of your bills, and then have just one structured payment to make each month."

Here's how it usually works:

• Say you have $20,000 in debt — a credit card, a student loan, and a car loan — in addition to your mortgage.  
• Your monthly minimum payments for these three debts total $900.
• If you take out a $20,000 home equity loan or line of credit and then pay off all of these bills, you'll have one payment per month to make.
• If there's a 60-month term on the loan, at a 5 percent interest rate, that payment will be $377.
• In this hypothetical situation, you will have slashed your monthly payments by nearly 60 percent.

Note that you may pay more money over the life of the loan if you consolidate your debt into a longer repayment period or at a higher interest rate, or if there are additional costs and fees associated with the loan. Calculate your total cost under the two scenarios in order to help you determine which route is better for you.

If you don't have home equity, many credit cards have zero percent balance transfer rates — which can mean you get a new credit card, transfer all of your other cards' balances over to it, and pay no interest on the debt for the promotional period. Make sure to find out the length of the promotional period, the interest rate after that period passes, whether the balance transfers are subject to a balance transfer fee, and whether any other fees apply.   

Or, you can take out a personal, secured or unsecured loan. The main difference between a secured and unsecured loan is the requirement of collateral. A piece of collateral, like an owned vehicle, can be used for a secured loan and may result in a lower rate than an unsecured loan that doesn't require collateral. A downside of secured debt consolidation is that if you default on the loan, you risk losing your collateral.

Where to Start If You Decide to Consolidate Your Debts

If you're considering consolidating your debts, Lawler recommends first gathering your various bills and determining the total amount owed and the various interest rates. Then use the Regions Debt Consolidation Calculator to find out how much you can save through consolidation.

Collect the last two years of tax returns as well as your homeowner's insurance information if you plan to apply for a home equity loan, and talk to your banker about your options.

Staying on Track After Consolidating Your Debts

Once you consolidate your debt, it's important to create a monthly budget and keep your spending in check. "Don't run up the balances on your cards again," Lawler says. "But don't immediately close out your cards, either. Figure out what route will help you accomplish your financial goals while also helping you build your credit."

If it makes sense to keep the cards open, use them sparingly, and try not to carry more than 30 percent of debt in relation to your limits on each one.

"Also, if it's possible, make more than the minimum payment on your loans," Lawler says. "Even a little more each month can really cut into the amount of interest you'll pay."

Debt can weigh on you, but you might be able to make the weight a little easier to bear through consolidation.