Do you have to be struggling with your debts to benefit from a debt solution?

The short answer is no. Debt consolidation loans are designed to help people manage their finances better - they are not suitable for people with serious debt problems. Here's why.

How a debt consolidation loan can help
In short, a debt consolidation loan can help you simplify your finances by grouping several debts into one, leaving you with just one monthly payment to deal with.

You'll take out a new loan, equal to the total value of the debts you want to pay off (plus any fees or charges). You will then start making single monthly repayments to your new lender.

This can make your debt much easier to budget for and keep track of. Another advantage is that it's often possible to reduce your monthly outgoings - by repaying the new loan over a longer period of time, each payment will be smaller. However, you'll usually end up paying more interest this way.

That said, if you are consolidating debts with a high interest rate - such as credit / store card debts - you may well pay less interest overall, as interest rates on loans are often lower.

Is debt consolidation right for me?
This all depends on your circumstances. Debt consolidation can reduce your outgoings and make your debt more manageable - but if you are already really struggling to afford your debt payments, the difference in your payments probably won't be big enough to make a real difference to your finances.

On top of that, if you're struggling now, taking on another debt probably isn't the best idea - you'd be better off finding out if a debt solution such as a debt management plan or an IVA (Individual Voluntary Arrangement) could make your debts manageable again.

But if you are fairly comfortable financially and simply want to reorganise your finances and / or free up some extra cash every month, a debt consolidation loan could help.