What happens in a debt consolidation program?
A debt consolidation program is the process of combining multiple debts (either in full or in part) into a single, more manageable loan.
Some debt consolidation companies will help you settle your debts as part of the service but this often comes at a price. If you elect to go through the process without the help of an agent, you will need to speak to lenders directly to pay off all of your existing loans. The loan itself will typically be unsecured if you are borrowing less than £5,000 or secured against your home if you want to borrow a larger amount (this is why you should always speak to your mortgage company about remortgaging first, as it is often a cheaper alternative).
If you have a serious debt problem, we recommend that you consider all of the options available to you before taking out another loan, as your home will be at risk if you do not keep up with repayments. Unlike a debt consolidation program, which actually increases the amount that you owe (the amount you borrow will need to cover your existing debts and an amount on top for interest), these alternatives (see IVA, Debt Relief Order and Bankruptcy) can actually reduce your debt.
You can read more about Debt Consolidation and whether it is suitable for your situation in our Debt Consolidation section.
Debt Advice Foundation is a registered UK charity offering free, confidential support and advice on any aspect of debt, including a debt consolidation program. If you need to talk to someone about Debt Consolidation or would like to discuss the alternatives, please call to speak to an adviser.