If you want to make your debts easier to manage, and make sure you have enough money set aside on a monthly basis for unexpected costs, then a debt consolidation loan could be the right debt solution for you.
How does debt consolidation work? A debt consolidation loan is a new loan taken out in order to pay off all your existing unsecured debts in one go, which will leave you with just one debt, instead of several.
This means that instead of making payments to several creditors every month, you will now make just one monthly payment to one creditor.
This isn't the only advantage of choosing to consolidate your debts, rather than continuing to repay your debts separately.
For example, you might be able to lower your monthly outgoings by spreading your repayments out over a longer period of time.
This may mean you'll pay more interest in the long run - but this isn't necessarily the case.
If you are consolidating high-interest debts (from credit or store cards, for example), you might spend less on interest overall.
How? Even if you're repaying the loan over a longer period of time (and will therefore pay interest for longer), the actual interest rate might be much lower than on your original unsecured debts.
This can mean you end up paying less in interest overall.
Who are debt consolidation loans for? Debt consolidation loans can help people who have multiple debts and want to simplify their finances.
Some people take out these loans because they're worried about their ability to keep up with day-to-day costs, and therefore want to lower their monthly outgoings.
This type of loan wouldn't be appropriate for people who don't have a fixed income or don't think they'll be able to repay the full amount of the loan in a realistic amount of time.