Defined as follows: 
A loan obtained to pay off multiple other loans.

We see these advertised everywhere with familiar faces on TV ads telling us how you can consolidate all your monthly debts into one easy monthly repayment and the memorable catchphrases that accompany the ads. Before you decide on a debt consolidation loan speak to an expert at Debt Assist 123

A debt consolidation loan will pay off your existing debts and transfer the amount owed into one single loan with one manageable monthly repayment. You will still have to pay back all the money you owe but with a debt consolidation loan you may be able to reduce your monthly outgoings, pay a lower rate of interest, or be able to spread the costs out over a longer time period. This very often means that although you are managing your monthly cashflow better you will end up paying more (in some cases substantially more) overall because the debt is being paid off over a longer period of time so ....... do the sums and look at all the options first.

If you are careful about managing your spending, a debt consolidation loan can help by:

• Removing the stress and worry. We all know the pressures that debt can bring - a debt consolidation loan has the potential to remove those pressures.

• Reducing your monthly payments. By spreading out the term of the debt over a longer period you will often be able to reduce your monthly repayments to a current manageable level. Most people are often paying the minimum payment allowed on the existing debts. This may mean just paying off interest each month and not reducing the amount of the debt.
• Improving your credit rating. If you are able to pay off the loan and accrue no further debt, this will be seen as a positive impact on your credit rating. It is also a good idea to check your credit report before you apply for a debt consolidation loan - see credit score mending and the credit check for more information.  
• Reducing the interest you pay. If your debts are with store or credit cards that have a high interest rate, then you will generally pay back less interest on your debt with a loan. Make sure you stop spending on your cards though.

Whilst unsecured debt consolidation loans are available it is more likely that such a loan will be secured against your property - read our sections on secured loans and unsecured loans and don't forget that you home is at risk if you can't keep up repayments.

BEWARE:

• The Consumer Credit Counselling Service believes that consolidating debt is a sensible solution for just 3% of people in serious debt
• Research has found that well over half of people who consolidate go on to rack up more debts using their cleared credit cards.
• If you do consolidate then make sure you close all those credit cards, store cards etc that you've just paid off ..... don't get tempted!!!!

Where can I get a Debt Consolidation Loan and is it right for me ?

Before you decide on a consolidation loan, find out what's on offer and what alternatives you've got. These could include:

• trying to make new arrangements with your existing lenders
• checking that you're making the best use of credit options you've already got - such as an overdraft facility, credit or store cards, a personal loan or extension to your mortgage
• borrowing from relatives