So you deal with one creditor a month instead of multiple creditors, and you make one payment a month instead of several. The theory is that it makes debt management easier, but in practice it doesn't always work out like that.

Debt consolidation

Debt consolidation comes in various forms. For instance, you might consolidate through a credit card, or a debt consolidation loan.

Debt consolidation is often tempting if you're looking make your overall debt easier to manage. However, consolidating your debts can often make the problem worse – you can end up with less favourable terms than your original debts, and more money to pay off.

The kind of deal you can secure will be dependent on a number of factors: the amount you want to borrow, your credit rating, your monthly income and ability to pay, etc.

Although debt consolidation might seem attractive, the loan can often accrue more interest than the original debts combined. Also, there could be penalties or fees incurred for settling existing debts early.

Another drawback is that when someone swaps multiple loans and credit card debt for just one larger debt, they can be tempted to borrow even more and worsen their debt problem.

Debt management

Often, a safer and more effective solution than debt consolidation is a debt management plan (DMP). A DMP is a programme of reduced payments on your debts, usually arranged by a third party.

The third party draws up the plan and contacts your creditors. If the creditors agree to the proposal, you make one monthly payment to the third party, who divides it between your creditors.

CCCS can assess your finances and if a debt management plan is suitable for your situation, we can arrange it for you. As a respected debt help charity, creditors usually agree to our plans, and our services to you are completely free, with no hidden charges – so every penny you pay to us goes towards reducing your debts.

Our first priority is leaving you enough money to live on while still paying off your debts.

Contact us for free, impartial advice on debt consolidation and management. Use our online debt counselling service CCCS Debt Remedy and we will review your situation and recommend the most appropriate debt solution for you.