Debt consolidation comes under harsh criticism by some as not really being a solution to debt at all. This is because debt consolidation does pretty much what it claims to do – consolidates debts. It doesn’t wipe them out or settle them. Critics believe that the fact that the total amount owed only ever stays the same or even increases (depending upon interest and costs associated with the debt consolidation loan) means that debt consolidation really isn’t a solution at all.

However, while it’s true that that this solution won’t reduce debts or clear them, it does have its advantages. Debt consolidation essentially involves taking out a loan big enough to cover the cost of all your other smaller debts and using this loan to pay those off. This then leaves you with one monthly payment as opposed to several! It makes the process for clearing debts more manageable and, contrary to popular belief, could actually reduce the amount owed in the long term, if for example, there is excessive interest and charges being applied to some of the smaller debts by existing creditors.

There is one element in which critics are right however. Debt consolidation is not accessible to many because it does require a loan. This will often either mean a decent credit rating or a home against which to secure a debt consolidation loan. You must also be in a position where it is possible for you to make regular repayments against it. For those with no income or for those who are close to having to declare bankruptcy, this will obviously not be possible.

For those who are insolvent and who believe they may have no other choice than declaring bankruptcy, it is worth looking into the government alternatives. These are the Debt Relief Order and the individual voluntary arrangement, both of which are legal alternatives to bankruptcy for people in certain circumstances.

The first proactive step forward when you believe you are experiencing a debt issue, however, it to admit it, assess it and then seek the professional advice you need. Unfortunately, burying your head in the sand will not help. You will feel less stressed and more as though you are moving forwards once you know the options available to you.

Find out more about Debt Management.

categories: debt advice,debt management,debt consolidation,personal finance,debt