Debt consolidation is used by those who want to reduce monthly repayments on their debts or transfer their debt to a cheaper deal. However, this will create a false sense of control over finances which makes people think that their debts are under control and that they can carry on with their spending and increasing their debt. This is what experts caution against when considering a debt consolidation loan.

What people need to understand when taking out a debt consolidation loan is that the money saved per month through debt consolidation should be used to reduce the debt. However, although this seems simple many people do not use a debt consolidation loan to relieve the pressure of their debt.

Debt consolidation is a great way of combining expensive debt into one cheaper form of debt. Ideally the loan should give you lower monthly payments and reduce the period of the loan. Debt consolidation works well for those with a good credit score and consumer credit card debts on high interest. These people will be able to consolidate their debts by either transferring to a low fixed rate or using an unsecured personal loan. Those with a poor credit score as a result of missing payments on a loan or credit card will find it more difficult to get a loan at a good rate. The only type of loan available to those people will be secured loans. Using this form of debt consolidation means that credit card debts, personal loans - all unsecured will become secured against your home. Miss payments on that and you'll end up losing your house.

What everyone must understand is that debt consolidation is the plaster on the wound. However if the cut is too deep then the wound will never heal. The deep cut in this case are those people who do not have control of their budget which is the key to financial happiness. Before considering what to do next about your debt problems you should first sit down and work out how much you spend on a monthly basis. Keeping a spending diary will help you work out where your day to day spending goes and where savings can be made. Once you have gained control over your spending the various debt solution options will become clearer.

To be a useful tool debt consolidation should only be used when you have control over your spending. Use our Statement of Affairs calculator to get control over your spending and if you have any problems or questions about how to address your debt problem you can either give us a phone on 0800 970 2698 or post in our debt forum. Don't ignore your debts - deal with them now!