Sometimes, the hardest part of managing your debts is keeping on top of all of your payments to different creditors. If you have many accounts, each with their own minimum repayments, interest free periods, and interest rates, managing your payments effectively can be a real problem. So many people who are struggling to maintain all of their creditor repayments look to debt consolidation as a solution, as it combines all of their debts into the one account that has one fixed payment amount.

Your first step towards debt consolidation would be to approach a banking institution and apply for a consolidation loan. A consolidation loan is like a personal loan, except that instead of giving you an amount of money, it pays out all or some of your existing debts, and you would then pay that loan back. Generally speaking, loans have lower interest rates than credit cards (although we always advise you to check before committing to it), so they can potentially save you some money in the long term. Another positive to consolidating your debts like this is that, without those credit cards in your wallet, you cannot add to the debt. You have to ensure, though, that you do actually close the accounts and get rid of the cards. Many people have fallen into the trap of paying out their balances with a consolidation loan, only to use the cards again and bring them back up to their balance, thus making their situation worse.

Sometimes, though, a consolidation loan is simply not an option. It could be that you have too much debt to be paid out by one loan, or your income isn’t sufficient to support the repayments. Or maybe you have a default on your credit file. A consolidation loan requires borrowing more money, which isn’t always possible, especially if you are struggling with your current debt. If this is the case, you might then want to consider a Debt Agreement, which is a legally binding payment arrangement that has a consolidation aspect to it. Your debts are not paid out in advance under a Debt Agreement; rather, they are frozen as they are, and you make one regular payment into it which is then distributed to your creditors by your Debt Agreement Administrator. It is not a loan, so it is a viable option for those who are, for whatever reason, unable to meet loaning criteria.

There are many additional advantages to a Debt Agreement, such as the interest on your debts being frozen, and a percentage of the debt being wiped off completely. There are some negative consequences to entering into one though, so you should speak to a professional and ensure that it is the right step for you before deciding to put one forward. At the Debt Agreement Advice Centre we have years of experience in administering Debt Agreements, and a “full disclosure” policy of providing advice to ensure that you are fully informed before making a decision. Call us today on 1800 653 485 to find out if a Debt Agreement is a good solution for your debt problems.