While looking for a debt reduction program, it is also important to ensure that the plan chosen is not an ineffective one.  One example is requesting for a loan from friends and family members who have the financial capability to help you repay all of or part of your loans.  This may seem to be a good solution because there is no interest to be paid unless you or they insist on it.  You can take your time in repaying the loan because you cannot default on the loan and there are no due dates to follow.  Unfortunately, the fact that there is no pressure on you to repay the money at a particular time could be a disadvantage because you may dilly dally too long in repaying the debt until your relationship with them gets hurt.

Another example of debt reduction programs that are ineffective is the plan to simply pay the minimum amount that is due every month for your credit card bill.  It may look like you are progressing in your plan to repay the debut but if you compute how long it would take to repay the whole amount, you might be shocked to discover that it is several years.  The reason is that the amount that is left unpaid will grow because of the interest that is added to it every month.

Another kind of debt reduction program that will not really get you ahead in your desire to become debt-free is getting the services of consumer credit counselors that charge exorbitant fees.  Credit counselors who are authorized to do business can really help you in your goal of becoming debt free.  However, there are certain individuals and companies who exploit the fact that people with lots of debt are emotionally stressed by asking for substantial amounts of money right at the start. 

Consolidating the various debts into one loan carrying a high interest is another one of the debt relief solutions that are not feasible.  The excitement of finding a loan that would accommodate all of the other loans and thus you have only one loan to think about may keep you from checking whether the interest rate is low or not.  It is advisable to check the fine print that is often found in the contract or else you may just be exchanging your debts with a loan that has a higher interest rate and will therefore make it even harder for you to escape the debt trap. 

Lastly, while bankruptcy can be considered as one of the debt reduction programs that may actually work, it is advisable to make it the last choice.  While it is effective for your debt reduction elimination for most of your debt, it will also degrade your credit rating for several years to come.

If you have multiple debts and would like to reduce your monthly outgoings, a debt consolidation loan could be right for you.

A debt consolidation loan can potentially save you money both in the short term (i.e. on a monthly basis) and in the long term (you could pay less overall towards your debts). However, it’s not always
possible to do both, so you should consider whether you would benefit more from reduced monthly payments or a lower overall repayment amount.

*How debt consolidation could save you money*

Your debt consolidation loan should be big enough to completely pay off all the debts you are consolidating. You will then repay this amount over time to your new lender, meaning you’ll only have one monthly payment to deal with.

You can make your monthly outgoings smaller by arranging to repay the debt consolidation loan over a longer period of time than you would have repaid your original debts. On a month-to-month basis, this will leave you with more ’spare’ money, which can be a big boost to your finances.

It may also be possible to save money in the long term if there is a big enough difference between the interest rate on your debt consolidation loan and the rates on your original debts.

Over the same time period, a lower interest rate on your debt consolidation loan will mean you pay less interest.

But if you decide to spread out your repayments – and therefore pay interest for longer, too – you could still end up paying more interest in total than if you had kept on with your original repayments.

*Does it matter if I pay more overall?*

Although you could pay more overall towards your debts if you repay your debt consolidation loan over a longer period of time, many people don’t consider this the most important thing if they are saving money on a monthly basis.

It’s easy to get caught up in the bigger numbers – for example, your debt consolidation loan might cost £5,500 to pay off over a period of five years, instead of the £5,000 it would have cost to repay your original debts over three years – but the reduced monthly payments should still have a positive impact on your ability to manage your finances. Many people consider this the most important thing.

More information on debt consolidation loans can be found on debt consolidation experts (http://www.debtadvisersdirect.co.uk/) Debt Advisers Direct website.