If you make monthly repayments to a number of different creditors, one option is to apply for a debt consolidation loan. The principle behind debt consolidation is that you borrow a large, lump sum to repay your creditors and are then left with one creditor and one monthly repayment.

Usually the repayments on this single, larger loan will be lower than the amounts you are currently paying your creditors. A debt consolidation loan can help many to reduce their payments for credit cards, loans, hire purchase, etc. It works very well if you can easily afford the repayments and are just looking for a way to simplify things and bring down the interest rates.

However, there are many people that struggle to meet the repayments each month. Some of these even find that their outgoings each month exceed their income. For these people, a debt consolidation loan is probably not the answer. If a person is in debt, taking out another loan to pay their other loans is not the answer.

A small reduction in their monthly repayments will not make a significant difference in allowing them to break out of debt. In cases like this a debt management plan or an IVA may be more suitable. This will also consolidate all your repayments into a simple monthly payment but it does not involve taking out another loan.

Ways to become Debt Free
IVA
Debt Management
Bankruptcy
Remortgage