One month you may be sitting down at your desk, or dining table, paying the bills, looking at your bank statement, seeing all the direct debits going out, and how they whittle down your earnings. Whittle them down to where you may not have much left to live on for the month.

Then you may say to yourself, how can I save more money, what can I do to decrease my outgoings?

We all have been there, sitting at that desk or table and saying the same things and asking ourselves the same questions.

In reviewing your expenses each month, maybe you notice a loan payment being made, paying on your Credit card, a catalogue payment, each of these an expense each month.

It would be easier you think if I just had one (1) monthly payment, instead of three or more payments to these accounts each month. And maybe, just maybe, it might be cheaper as well; I could save money.

That thought is consolidating accounts; take two or more accounts and consolidating them into one (1) account and one monthly payment.

An example may be this:

* You have a credit card with a balance of £3,000, monthly payments of £75.

* You have a personal loan of £5,000, monthly payments of £150, with 36 months left to pay.

* You also have some smaller store cards totalling £1,000, payments are around £30 or so a month.

If you were to take out a loan for £9,000 at 5% for 48 months, to pay off all the accounts, your monthly payments could be around £206.00, which saves you around £50 a month.

It will depend on the interest rate and term/length of the loan as to if your savings will be more or less.

If you were to consolidate a few credit cards, especially if you are currently only paying the monthly minimum payments, the savings in interest, and time to be out of Debt, is much greater. By only paying the monthly minimum payments, it can take many, many years to pay the accounts off.

A consolidation loan not only saves you money, but gives you a light at the end of the tunnel.

There are various ways to consolidate accounts together, and various types of loans to do this.

One thing must be stated when it comes to consolidating debts/accounts, you cannot borrow your way out of debt.

If you feel the need to consolidate your loans, credit cards, etc, you need to address the issue of what brought you to the point of wanting or needing to consolidate them in the first place.

If it is the use of credit cards, you need to make sure you do not continue to use the cards after paying them off in a consolidation. If you do not do this, you will simply be adding more debt and payments each month, and now have the new consolidation loan payment as well.

One way to consolidate credit cards is to transfer the balances of two (2) or more credit cards to just one credit card. While an option to consolidate the accounts, this is not without its caveats.

* You need a sufficient credit limit on one credit card to accommodate the cards being transferred to it.

* You need research the interest rate and future payments.

* Can you pay extra each month towards the new larger, one credit card’s balance?

There are two examples we can use here:

* You are offered a zero interest rate credit card.

* You want to consolidate your credit cards with an existing card you have.

If you are offered a zero (0%) credit card, this is an enticing offer, but you need to be aware of how long the “introductory” interest rate of 0% is being offered for. If only 12 months, then IF you have a sufficient credit line, and IF you can afford to pay off the new full balance of transfers, and IF the interest rate is good for balance transfers, then this may be a very good deal.

It may not reduce your monthly payments, but it does allow you to get out of debt much quicker.

If you are seeking to consolidate your credit cards with an existing credit card, the same caveats apply.

Do you have a sufficient credit limit, and what is the interest rate, and can you pay more than the monthly minimum payment.

If the answers are a resounding yes! Then transferring balances is one way to consolidate other accounts into one monthly payment.

Personal loans come in many shapes and types, however the basics of a personal loan is that they are an unsecured loan granted for various purposes.

You apply for a loan of £xxxx for a term of (insert months here) at an interest rate of (insert % here), and this determines your monthly payments.

The lender will ask the purpose of the loan, and you can state it is to consolidate some debts, accounts, whatever.

If the lender approves the loan, the money is transferred into your account, and you have control over the funds and how they are used. It is your responsibility, or up to you, if you pay off the other accounts you wish to consolidate.

In many instances by extending the term of the loan, and receiving a good interest rate, especially if consolidating credit cards, your one (1) monthly payment will be lower than what you had been paying, in addition to knowing when you will be debt free.

You need to research the loan(s) being offered to you to insure they are aiding in reducing your monthly outgoings, and not keeping you further in debt.

Specific Debt Consolidations Loans

Debt consolidation loans are usually unsecured loans, targeted and aimed for debt consolidation. The purpose of the loan is to consolidate other loans.

With just a personal loan you may not be asked what other accounts you have and their balances, this can be seen on your credit history. However, with a specific debt consolidation loan, the lender can ask what accounts are you seeking to consolidate? The accounts and their balances.

This helps in determining the loan amount you require, and also if you qualify for that amount and its corresponding monthly payment.

As with a personal loan, you need to research the loan amount, interest rate and term, to make sure it is the best deal and best way to consolidate your accounts.

Another type of loan that can be used to consolidate other accounts is a secured loan, and usually these loans are secured by property; property that has equity.

Equity in a property is the difference between the value of the property, and what is left owed on the property.

A property valued at £200,000, with a remaining balance on a mortgage of £100,000, is said to have £100,000 in equity.

Most lenders will grant a loan on a percentage of that equity, say up to 70%, maybe more, which means the property owner could get a loan of £70,000, which is secured against the property as a second charge.

There are some advantages to using a home equity and secured loan to consolidate other debts/accounts, and also one huge disadvantage.

The advantage is that the loans are easier to be approved for as long as you have sufficient equity in your property, and an OK credit score.

Another advantage is that the interest rates can be lower than unsecured loans, and the terms may be longer, which both reduce the monthly payment, making it more affordable.

The disadvantage, and this is a biggie, you are taking unsecured debts and making them secured; secured against your property/home.

Should you struggle, or fail to meet the new loan payments, your property is at risk.

For this reason alone, home equity loans should be a last resort for consolidating debts.

If a person is really struggling with many unsecured accounts, they may wish to look into a Debt Management Plan, or even some insolvency options.

Debt consolidation can be a useful financial tool to manage one’s finances, however, two points need to be made:

* You are only moving debt around, changing and transferring it from one loan or form to another.

* You need to resolve what brought you to the point of needing a consolidation loan in the first place.