A debt consolidation loan may be suitable for someone who is keeping track of several debts, and wants to simplify their finances and/or lower the amount of money they spend on their debt each month.
Borrowers can use a debt consolidation loan to repay all their unsecured debts in one go. Once this has been done, they will repay the loan in monthly instalments to their new creditor - which means they will make just one monthly payment instead of several, simplifying their monthly finances.
A debt consolidation loan could also help them lower their monthly expenditure. Debt consolidation gives them an opportunity to increase the period of time over which they are repaying their debt - which means each monthly payment will be smaller. However, this does mean they'll be in debt for longer, and may end up paying more in the long run, as their debt would spend more time accruing interest.
On the other hand, if the individual is consolidating high-interest debts such as store cards, the interest rate on their consolidation loan may well be significantly lower, which means that they may be able to save money in the long run as well as on a monthly basis.
Would a debt consolidation loan be right for me?
If you know you can repay your debts in a realistic amount of time, but would feel more comfortable with more 'spare' money each month, then debt consolidation may be right for you.
Please bear in mind, though, that before committing to a debt consolidation loan (or any debt solution, for that matter), you should always seek professional financial advice. They will be able to discuss your situation with you and let you know if debt consolidation is right for you - and if it isn't, they may be able to suggest an alternative debt solution (such as a debt management plan).
