Debt consolidation is not suitable for everyone. Whether it is right for you will depend on a number of factors including your credit rating and whether you can afford the loan repayments.

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• Will you be approved for a consolidation loan?
• Can you afford the loan payments?
• How will your credit rating be affected?
• Change your spending habits

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Will you be approved for a Consolidation Loan?

Debt Consolidation may only be suitable if you have a good credit rating. If your credit rating is poor because you have missed debt payments in the past you will probably not be offered a consolidation loan.

If you are unable to get a loan you will normally have to consider an alternative debt management solution.

Check your credit rating before applying for a  consolidation loan. You will then be able to see if there are any reasons why your loan application might be declined.

Can you afford the Consolidation Loan payments?

If you are struggling to pay your debts it may be extremely tempting to try and consolidate because you believe your monthly payments will be reduced. This is true however before deciding if consolidation is suitable you must make sure you can afford the new loan payments.

Many people get even deeper into financial difficulty because they take consolidation loans which they actually cannot afford to repay. If this is the case they are still struggling and start using the debts that were consolidated (such as credit cards) once again.

Calculate your disposable income to work out if you can afford the new loan repayments before taking a consolidation loan.

How will your Credit Rating be affected if you get a Consolidation Loan?

One of the significant advantages of using debt consolidation to resolve a debt problem is that it will not effect your credit rating. This is because it does not involve reducing or missing any of your agreed creditor payments.

If you consolidate your debt with a single loan your smaller creditors will be paid off in full. Your accounts will not be in default and no problems will be recorded against your credit file. As such, simply consolidating your debt before you have missed any payments will mean your credit rating is not affected.

Change your spending habits – Stop using credit cards

Using consolidation as a means of resolving a debt problem will only be suitable if you also change your spending habits. If the reason why you got into debt in the first place does not change then consolidation will probably not help.

If you continue to spend beyond your means it will not be long before you are using your credit cards again and they start reaching their limits. However this time you will also have your consolidation loan repayments to make as well.

Before you take a consolidation loan make sure that you can properly manage your spending by understanding your personal income and expenditure. After you have consolidated the cut up your Credit Cards so you are no longer tempted to use them.