How can debt consolidation help me?

So, you’re considering consolidating all of your outstanding debts? You have a lot of different levels and types of debts from a large number of sources. You owe money to multiple creditors, all varying amounts and all repayments due at different days in the month. Well, before you go rushing into a big decision like this, there are one or two things you ought to think carefully about.

Why debt consolidation could help you:

First off, why don’t we start by talking about some of the advantages of debt consolidation? Over the next few minutes we are going to discuss some of the reasons why more and more people seem to be turning towards this innovative new solution to their debt management problems.

One of the main advantages that debt consolidation can offer us all is a generally easier life. Balancing so many different creditors, and constantly trying to keep them all happy, is akin to spinning plates. If you leave yourself with too many plates to spin, sooner or later, something is going to come crashing down around you. Take your eye off the plates for a split second, and you will find yourself sweeping up the shards of pottery for a long time to come. Well guess what guys, debt management is no different.
Having so many bills and repayments due to go out can be confusing in itself, but when all of your payments are due on different days of the month, keeping track of what has been paid and what hasn’t can turn into a quite a demanding job in its own right.

Debt Consolidation - working out your finances

Debt Consolidation - working out your finances

To manage these repayments much more effectively, many families and individuals alike are now beginning to turn to customised debt consolidation plans to provide an easy, quick fix solution to their debt worries.
By consolidating your debts in this way, you instantly go from having seemingly countless creditors, to only having one person who you owe money to. This means that you can say goodbye to trying to keep on top of what payments are due to whom and by when. Having consolidated the debts, you only need to worry about making one monthly payment, to one company.

How does debt consolidation work?

So how does debt consolidation work exactly? Well, in its simplest form, this is the amalgamation of all of your existing debts into one central loan with (hopefully) lower monthly interest rates than the sum total of your outstanding debts. Those companies who specialise in providing these types of loans will lend you the money you need to instantly pay off all of your debts at either a fix rate of interest, or a variable tracker rate which can fluctuate over time with the ebb and flow of the stock markets. With the lump sum of money available to you on the granting of the loan, the consolidation company will help you to contact and negotiate with all of your various creditors to pay off your outstanding debts.

The other popular type of debt consolidation treatment available to struggling debtors is something that operates on a similar premise, but executes the solution rather differently. There exists a second type of debt consolidation company out there on the market today. These companies will simply help you to negotiate better repayment terms and lower rates of interest from all of your main creditors. The company will then help to draw up a plan of how much money you can realistically afford to pay out on a monthly basis, and insure that all of your creditors work to within those measures.

There are various legal statutes and pieces of legislation in place which these companies can use to help them to encourage creditors to work with you, rather than against you. These legal precedents and statutes are hugely complicated, and therefore not really something we want to get into too much detail about during this article. Suffice it to say however, that every single person, company and organisation which lends you money in any way, has a duty to do so responsibly. There are legal safety nets in place which stipulate that companies much initially make sure that your financial status is such that you can support the added level of debt which will arise from the monetary loan which they are proposing to give to you. But their legal (and indeed, moral) duty does not end there. They must also continue to work with you throughout the life of your repayments up until that debt is cleared and repaid in full, to make sure that the terms and conditions of the debt, the interest and the repayments, always stay within the constraints of affordability given your income.

So what does this all mean for people who are struggling to repay their debts? Quite simply, it means that the days of laying awake at night worrying about your debts as your finances spiral rapidly out of control, are all but gone. If you genuinely cannot afford to repay the debts, then the law states that those lenders have been irresponsible in lending it to you in the first place. As such, you may well be entitled to write some or all of the debt off on these grounds.
Don’t be a hero and try to plough on and manage all of these many and varied debts by yourself. There are plenty of companies out there who can help you to take the stress out of plate spinning.

Multiple credit lines can be a real headache - is consolidation the answer?

Multiple credit lines can be a real headache - is consolidation the answer?

Why all may not quite be what it seems in the world of debt consolidation:

But with so many companies out there on the market today all claiming that they can help you out when it comes to debt consolidation, how do you know who to trust? Like most things you buy or services you enlist, picking the right one can be vital. But nowhere is this truer than in the financial sector. Unfortunately, due to the fact that there are so much money and potential profits at stake, the last few years have seen a huge increase in the number of companies which have sprung up to help people facing this difficult set of circumstances.

We also feel like it is important to point something out to you all at this point. Many people who go into debt consolidation efforts, with unrealistic expectations. We have seen and heard from many people who have taken debt consolidation action and been left disappointed with the results and the position it left them in. You see, while it is a useful and very empowering tool for any debtor to have in their arsenal, debt consolidation is not the be all and end all. Many people think of this kind of action as being the equivalent to waving a magic wand. In reality, this is not what debt consolidation does, and nor is it what it is intended to do. In summary then, the consolidation of your outstanding debts in this way can indeed be very useful, but it is not the instant end to all of your money worries that a certain percentage of people seem to believe it to be. What the cold hard facts and figures can’t tell you though is the relief that comes with the knowledge that your debts have been restructured, and your monthly payments have been reworked to be brought more in line with your current income levels.

Before we leave you to enjoy the rest of the website, we just wanted to take this opportunity to offer one final piece of advice to those of you who are considering debt consolidation as a viable option in your current circumstances. Often, consolidating your debts in this way can and will, save you money. However, this is not always the case. Some companies will consolidate your debts by giving you one large loan instead, when the interest on the large loan itself actually works out to cost you more than the sum total of interest which was being accumulated and paid on your debts prior to the consolidation taking place. With this in mind, we would advise people to exercise extreme caution before rushing into any kind of rash decisions, whether they are regarding debt consolidation, or indeed any other aspect of yours and your family’s financial health. Make sure that you take the time to discuss and review all of the options that you have available to you. Some time spent with a properly trained financial advisor can literally be worth the cost ten-fold.

By Matt Burns for