Consolidation is often the first solution you turn to if you are struggling to repay your debt. It is the practise of paying off multiple smaller debts with a single loan.

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• Remember this when considering consolidation
• Consolidation using an unsecured loan
• Remortgaging your property or using or secured loan

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Remember this when considering Debt Consolidation

A key aim of consolidation is to reduce your your monthly debt payments so they are more affordable. You are also looking to reduce the interest charged so your debts are repaid more quickly.

The single loan payment you are left with must be affordable. It may be less than the total of the debt payments you were paying before but this does not matter if the payment is still more than you can pay.

Before going ahead with consolidation it is vital that you calculate the maximum you can afford to pay towards your debts each month. If based on this you will not be able to afford the new loan without having to continue to borrow don’t do it.

If consolidation will still leave you with debt payments you can’t afford it is not a suitable option for you. You should consider an alternative solution.

Debt Consolidation using an unsecured loan

There are different ways you can consolidate debt. By far the most common is by using an unsecured loan. The loan is borrowed from either your bank or another lender.

The loan is used to pay off the balances of your multiple smaller debts. You are then left with just one debt and a lower monthly payment which is easier for you to afford and manage.

Remortgaging your property or using a secured loan

If you are a home owner and there is sufficient equity in your home you might be able to achieve debt consolidation using a secured loan. Alternatively you might be able to re-mortgage . In other words take a larger mortgage and use the extra cash raised to pay off your unsecured debts.

Secured loans or re-mortgaging can offer advantages over borrowing on an unsecured basis. Firstly the monthly repayments are often lower then the equivalent unsecured loan. This is because the debt is repaid over a longer period of time. Secondly you are often able to borrow a larger amount on a secured basis.

However you must always remember that the loan is secured against your property. This means that if you do not keep up the payments the lender can force you to sell your home to recover their debt.