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A consolidation loan often appears on the surface like a good idea, consolidating all your debt into one loan in order to reduce the monthly payment and clear up potentially bad credit.
In actuality, you are simply given a bank loan against your personal property. The concept is that you use this money to payoff high-interest credit, or generally unsecured debt (possibly a student loan). In most cases you are required to use personal assets (like the equity in your real estate) as collateral. Many people who are in deep debt do not have enough equity to qualify for an additional home loan. Many of those that do qualify are concerned about taking on additional mortgage debt (even if it is a comparatively low interest rate), particularly from a secondary lender with additional financing costs.
Let's assume that you have enough equity in your home, and you take out a refinance consolidation loan against that equity. You use this money to pay off your credit cards so they have a zero balance. Inevitably you charge a few things here and there and before you know it, your credit cards are extended again.
The net result is you would have the consolidation loan (including refinancing costs) plus the credit card balances. But unfortunately, no more equity. The home-owner finance value of your real estate is gone.
If you were in financial distress before, you have only compounded the problem now.
Become debt free!
