Debt Consolidation

Debt Consolidation as a Solution to Debt Problems

One of the most popular (and widely publicised) methods of solving debt problems is the process of consolidation. Somewhat paradoxically, debt consolidation involves the taking out of yet more credit, which might not seem like the most sensible of ideas if you’re already struggling.

In fact, you use this new finance you obtain to clear all your existing debt, which if done carefully will leave you better off in at least four ways:

Lower Repayments

By taking out a low rate loan, or by extending the repayment term, you should be able to secure a monthly repayment that’s less than the combined total of your current bills.

Simpler Finances

Through replacing all your debts with one single loan, you reduce the number of monthly payments you need to make to just one. This makes things simpler to keep up with, and reduces the chance of overlooking a repayment by accident.

Stop Late Payment Charges

By getting your finances back under control, you’ll stop having to regularly pay late payment fees, so leaving you with more disposable income.

Peace of Mind

Juggling debts is incredibly stressful, and if consolidation is appropriate and will result in the three outcomes listed above, your sanity will thank you greatly for it.

Consolidation Drawbacks

However, consolidation does have some serious potential drawbacks which you need to bear in mind before deciding to go ahead.


Most consolidation loans are secured on the borrower’s property, especially where there’s some element of bad credit involved. This means that you stand to risk losing your home if you get into trouble again in the future and can’t keep up with your repayments. Because of this you need to think very carefully whether this risk is likely to happen.

More Debt

Once you’ve cleared all your credit cards and the like, there’s the temptation to start spending again, and you could very well find yourself running up new unsecured debts while still having to pay your consolidation loan. This is obviously not desirable, so make sure you cancel your card accounts etc to close off your lines of credit and avoid temptation.