Debt consolidation loans
By consolidating your debts, you can simplify your finances, reduce the amount you're paying every month and - in many cases - reduce the interest rate you're paying on your debt.
This can free up money on a monthly basis, helping you make sure you have the funds you need to manage your day to day finances and be in a better position to cope with unexpected costs.
What's more, you can do it without affecting your credit rating. Some debt solutions will damage your credit rating as they involve asking lenders to accept changes to your repayment plans or even write off debt. Debt consolidation loans, on the other hand, simply involve taking out a new loan and using it to pay off your existing loans and other debts - as far as your 'old' lenders are concerned, the only thing that's changed is that they're being repaid earlier than they expected.
Making things simpler
Consolidating your debts can make your life a lot simpler. Rather than struggling to keep up with multiple debts, you'll have just one to keep track of. Every month, you'll have just one payment to make.
In itself, this should help you stay on top of your payments - with just one repayment to make per month, you'll find it much easier to remember to make that payment on time.
You'll also find budgeting a lot easier. Planning your month around multiple debt payments can be tricky (especially when payments vary and you need to calculate percentages), but once you've consolidated your debts you'll know exactly how much money you need to set aside out of your monthly budget.
It all adds up to one thing: you'd be more likely to make your payments on time, every time. It's an important benefit, since many lenders will impose late-payment and non-payment charges, which can really add to the overall cost of repaying your debt. Plus, 'defaulting' on your repayment terms will show up on your credit rating, which can make further credit harder and/or more expensive to obtain in future.
A matter of interest
Different debts come with different interest rates. Credit cards and store cards might offer a lot of convenience and ease of use, but if you can only afford to make the minimum payments each month they're not a good way to 'carry' the debt you've built up.
The debt you've built up using credit cards and store cards won't disappear overnight - but you could reduce the interest rate you're paying by paying them off in one go with a debt consolidation loan.
If you're a homeowner, you may be able to access lower-rate loans for debt consolidation. If you use part of the value of your home (known as equity) to secure the debt against, your loan will be a lot less risky from your lender's perspective, which means they're more likely to offer you a lower interest rate. They're also more likely to offer you a larger loan, with a longer repayment period.
It is important to note however, that because interest will accrue for longer repaying any debt more slowly can add to the overall amount you repay. Plus, you should think very carefully before securing any debt against your home, as failing to keep up with your repayments can lead to your home being repossessed.
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