For anyone struggling with debt in these financially uncertain times, a debt consolidation program can often be the most sensible and effective way of coping with escalating demands from an increasing number of creditors.
Debt is often described as a spiral: once you get sucked in, it becomes increasing difficult to escape. Today, with the threat of unemployment, pay freezes and rising essential bills, budgets are stretched to the limit and many people simply have no extra resources available for unforeseen events.
It is in these circumstances that many fall into the trap of borrowing money from unscrupulous sources, such as payday and doorstep loan providers. These loans are easily available and targeted at people with poor credit ratings, but they involve horrendous levels of interest. And the vicious cycle of debt tightens as those already in debt invariably have to borrow more from one creditor to pay off another. In addition, many of these loans are secured against a property, which means you can lose your home if you fail to keep up payments.
Debt-consolidation, or debt-management, plans involve combining debts to all creditors into one loan with one single monthly payment. The idea is to ensure that this payment is affordable and will not result in clients continually having to borrow more and more money just to meet their debts.
These programs are generally offered by reputable organisations whose aim is to help people manage their finances and clear their debts, not just make more money from them by offering more credit at high interest rates. In certain circumstances they will also negotiate with creditors to try to freeze interest and charges on existing debts, so avoiding any additional costs being accrued on top of what is already owed.
A reputable debt-consolidation company will also work to ensure the plan agreed operates in the most convenient and effective way for its clients, offering a range of contact options, the opportunity to discuss their situation with a fully trained, impartial adviser and continuing support throughout the duration of the plan. They can also recommend other ways in which clients can budget more effectively, such as energy saving and switching utility providers.
As would be the case with any organisation offering financial advice, however, it is essential for any would-be client to check that it is authentic and authorised by the Office of Fair Trading or other regulatory body.