Most people who take out a debt consolidation loan are looking to reduce their monthly outgoings, which can be done by spreading out your monthly payments over a longer period of time than laid down in your original agreements. However, be aware that this will also mean you pay interest for longer, and therefore the overall amount you pay may be higher.

However, if you are consolidating high-APR debts, such as credit cards, it may still be possible to save money overall. As long as the interest rate on your debt consolidation loan is lower than the rate you`re paying on your existing debts, you could save money. If you`re unsure, let a debt adviser help you do the calculations.

Would I benefit from a debt consolidation loan?

This depends on your situation - how much debt you`re in, and how easily you are able to meet your existing commitments. You should also consider whether your circumstances are likely to change in the future (e.g. your income).

Typically, a debt consolidation loan is best for people who are managing to repay their debts under the original terms, but would like to simplify their finances and/or make their debts more manageable by reducing their monthly outgoings.

You do not have to be in a certain amount of debt to take out a debt consolidation loan. Some people who take out this type of loan are easily able to meet their existing commitments, but are looking for the convenience of a single monthly payment and/or a reduction in their outgoings.

However, be aware that if you are simply unable to meet your existing repayment arrangements, a debt consolidation loan may not make a big enough difference to your outgoings for it to be worthwhile. In this case, you may want to consider a debt solution that can cut your monthly outgoings more significantly, such as a debt management plan or an IVA (Individual Voluntary Arrangement).

Should I consider any other debt solutions?

As with any financial decision, you should always research what is on offer and ensure that you have a full understanding of what`s involved. A professional debt adviser can help you establish the right way to manage your debts, whether it`s a simple reshuffle of your finances or a dedicated debt solution.

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