The benefit of a debt reduction loan (or debt consolidation loan) is it makes it possible to combine all your debts into one and only have one monthly payment.
Usually you can get a lower interest rate and be able to save some money that way. Getting a loan to pay off all past due bills and outstanding debt will get the unfavorable reports off of your credit report and you will only be responsible for making the one payment each month to the lender.
How do you know if a debt consolidation loan is for you? It all depends on your situation. Keep in mind that your debt is not reduced in any way, you have just put them all together and are only making one payment. The size of the payment you are making depends on the interest rate the lending institution gives you and the term or length of the loan.
You will find that a debt reduction loan may not get you out of debt any faster but if you have the determination and the ability to pay off the debt with only one payment then the time it takes to pay it off will be a lot less stressful.
Just be careful not to incur any more debt after consolidating your present debts. Cut up those high interest credit cards and do not use them again. If you do continue to use them you will only exacerbate the problem. You are trying to make your situation better not worse.
Also keep in mind that with a debt consolidation loan from a lending institution you are trading unsecured debt for secured debt. This means that the debt you incurred by using a credit card is debt that has no collateral behind it and the credit card companies have very little recourse to get the money owed to them if you cannot make your payments on time.
Secured debt has collateral behind it and if you fail to make your payments on time the lending institution who extended the loan to you can and will take the item put up as collateral.
If that item happens to be your house, then you most assuredly will be looking for a new place to live. Do whatever you can to make the payments on time if you consolidate your debt and get a secured loan from a lending institution.
If your debt is relatively small and you have a long standing relationship with your lending institution, ask them if they offer an unsecured consolidation loan. Unsecured consolidation loans are given in smaller amounts and could be the answer if your debt is lower and you have no collateral to put up.
An unsecured debt reduction loan will have a higher interest rate than a secured loan, and is harder to get, but the lower amount borrowed will not take as long to pay off so it is a decent trade off and there is basically nothing to lose.