With the huge amount of debt that people in the UK are currently owing across various means, such as credit cards, loans, car financing etc, debt consolidation is becoming more and more popular.  People are understandably looking for a way our of the debts they have, and with the economic climate hitting many people in the pockets and bank balances they are also looking ways to cut down their monthly bills.

Which is why debt consolidation is a fast rising method of dealing with debt.  Debt consolidation is usually done via means of a loan that is used to pay off all other debts, leaving just the one large debt, rather than a lot of small ones.

But what is the advantage of doing so?  Why should you use, or not use, debt consolidation services?

The pro's of debt consolidation

• You are only dealing with one company.  By having debts with a lot of companies it is easier to forget to pay one, or to lose contact details etc.  By having all your debt in one place you know exactly what to pay when, and where you stand with them.
• Reduces monthly bills.  Because your debt is one piece, rather than being spread over small debts your minimum payments will be less.  For many people this is the major attraction of doing debt consolidation, freeing up spare cash for them to spend every month!
• Competition.  Because of the huge amount of companies offering their services as debt consolidation experts you are able to use this competition to get some very good deals.  Shop around, play one company off against the other and you should find particulars such as APR and payments terms become much more in your favor.
• Avoid legal problems.  By paying off your debts to the credit companies you will have cleared any potential legal problems over missed payments etc.

Con's of debt consolidation

• Length of time in debt.  Because you are paying off your debt in one lump sum and with less money each month the length of time you will be in debt will of course go up.
• Interest.  Whilst you can get some great deals on the interest rates form debt consolidation loan companies because you are paying the debt off over a longer time you will still be paying interest, probably more than you would otherwise simply because the interest will be over a longer time period.
• When you have taken out a loan to clear your credit cards you still run the risk of running up more debt on the cards.  You need to exercise will power and restraint to stop yourself doing so again.

As you can see there are pro's and con's to both sides of the debt consolidation argument.  You need to ensure that you look at both sides and work out which is best for you before progressing or walking away from debt consolidation.