Currently a typical re-mortgage for people with poor credit ratings is approximately 8.5% APR with secured loans at around 14.5% APR.

These interest rates should be lower than the combined average of your current debts; you can check how much you could save by using this simple consolidation calculator.

Debt consolidation allows you to consolidate your outstanding debts into one loan. This fixed monthly payment offers a lower interest rate, which effectively lowers your monthly repayments so you save money.

If you are unable to get a secured loan then you could look towards obtaining an unsecured loan, your interest rates will inevitably be much higher as you are seen as a higher risk client.

If you do take out a secured loan for debt consolidation purposes and it is secured against your home make sure that you are 100% able to pay this back otherwise your house could be repossessed. It is best to write down all your monthly outgoings before signing on the dotted line just to make sure you will realistically pay this loan back and not have your house repossessed.

Debt consolidation secured loans – These allow you to consolidate unsecured debt with a secured loan.

Debt consolidation remortgage – Allows you to move unsecured debt which is usually at a high interest rate onto your mortgage at a lower interest rate.

Of course, this means that it takes years to pay off the balance and a huge sum of interest is paid over the term.

Debt consolidation is often a good solution for such people: a debt consolidation loan is used to pay off all existing debts and features a single, affordable monthly repayment. Below is a quick guide to the different types of debt consolidation:

• Unsecured Personal Loan: These are available over various terms (1-7 years) and at various rates of interest (usually much less than the interest charged on credit and store cards). No security is required but an exemplary credit record is needed; lending criteria has been tightened as a result of the credit crunch.

Various amounts can be borrowed, usually from £1,000-£25,000, and with each payment made the balance decreases. If you use this method of borrowing to pay off debts you must be disciplined and make sure you do not run debts up again (it would be a good idea to cut up store cards/credit cards).

• A Secured Loan: these types of loan are secured on a property (thus they are only suitable for homeowners) and are a possible option for those homeowners with less-than-perfect credit histories, the self-employed, those who wish to borrow large amounts (up to £50,000 or more), and those who require a longer repayment period (up to 25 years).

Be aware that this debt is secured on your property and your home may be repossessed if you do not keep up with repayments.

Used responsibly, these two types of debt consolidation loan can save you thousands in interest and can improve your credit rating (providing payments are adhered to).

If you wish to take out a loan, check out an online comparison site such as uSwitch to find the best deals and rates. Obviously, you will need to have an adequate regular income in the form of employment to take out a loan.

Louise Bond, personal finance manager at uSwitch.com comments:

“As we embark on what is expected to be one of the toughest years in the history of the UK, it is vital that borrowers give themselves the best possible chance of servicing their debt in the most economical and manageable way possible.

If consumers are careful about managing their spending, a debt consolidation loan can help to reduce monthly repayments and it can also help to settle borrowings earlier, as repayments are fixed and set for an agreed number of years.

Borrowers need to be aware that taking out a loan or credit cards to consolidate debts must be approached in a disciplined way and should not be treated as a quick-fix solution to debt problems.

Those who consolidate their debt into a single loan should only borrow enough to cover all their debts and no more, and all existing debts must be closed down immediately.  The purpose of a consolidation loan is to reduce debts – consumers should not be tempted to fall into the trap of racking up these debts again as they could end up finding themselves in a vicious debt cycle.”

If you have debts and lose your job, you need to take action fast. Visit a debt advice agency such as the Citizens’ Advice Bureau and they will be able to advise you accordingly. They will work out a debt management plan for you and negotiate with any creditors on your behalf. Repayments will be based on your ability to pay and any interest will be frozen, meaning a big weight off your mind. Payments for people with limited income can be as little as £1 a month.

If you are struggling with debt, whether you are in employment or not, seek the advice of a debt counselling agency (such as National Debtline) as soon as possible.

Peter McGahan, Managing Director of Worldwide Financial Planning, advises:

“Ensure you pay off debts that have the highest interest rate first. Also, remember to pay bills that are secured to your property; if you default for long enough they will potentially repossess your house. A personal loan is less important, for example, as the loan isn’t secured on the property.

Make sure your interest is calculated at least monthly so the debt is reduced accordingly. Some banks calculate interest yearly so any payments are not really taken into account until the year end.

Also, if you have money in some form of investment or savings which is earning you 2% interest but have debt that you are being charged 9% on, it’s quite clear that the debt is costing you a lot more than what your savings are earning, so consider repaying that debt”.

Some debts, such as store cards, hire purchase and credit cards carry high interest rates, and if you are paying off several debts at high rates, a debt consolidation loan may offer a solution to this.

In simple terms, a debt consolidation loan is used to clear all your debts and you pay this loan off with one manageable monthly repayment. There are many advantages to a debt consolidation loan, such as:

• Owing one debtor rather than severa.

• Many people manage their debts by making the minimum payments, meaning the total owed will take years to clear. With a debt consolidation loan, you can see the balance owing going down each month.

• You may be able to get a loan at a competitive interest rate, saving hundreds (if not thousands) of pounds in the long-term.

• Choice of loan term means you can tailor payments according to your financial circumstances (although bear in mind that if you pay over many years, the total interest charged will be substantially higher than if you paid over a shorter term).

• Providing you maintain payments, a debt consolidation loan can drastically improve your credit rating. Whilst this is a good thing in certain circumstances, such as applying for a mortgage, it is imperative that you resist the urge to take out further credit.

One of the problems associated with obtaining a debt consolidation loan is choosing the right provider: typing ‘debt consolidation’ into a UK internet search engine displays 227,000 results! There are literally thousands of finance companies offering such loans, and it is important to make the right choice. Here are some tips to ensure you choose wisely:

• Some debt consolidation loans are secured, which means that the debt is secured to a homeowner’s property and, if the homeowner defaults on the loan, the property may be seized. While this type of loan may be the only option available to homeowners with poor credit histories, there are often other options available to those with good credit histories, such as personal bank loans or other unsecured loans.

• Pay attention to interest rates, as these can vary widely (seen below). The figures show the repayment of a £15,000 loan over 5 years, with the first column showing the monthly amount payable, and the last column shows the total amount payable – there is a staggering £4490.43 difference in the total amount payable on interest rates of 7.90% and 18.90% respectively.

If you do not feel that a debt consolidation loan is right for you or you cannot obtain further credit, there are other options available:

• An Individual Voluntary Arrangement (IVA) is a formal arrangement between a borrower and their creditors, whereby a set proportion of the total debt owed is paid to each lender. After 5 years, the debts are usually classed as settled, with any remaining debt written off.

To be eligible for an IVA, you must have unsecured debts of at least £12,000 and be able to afford to pay a minimum of £180 per month off this.

• The government are introducing Debt Relief Orders in April 2009, and these allow those on low incomes to rid themselves of debt which they have no possible means of repaying. To qualify, people must have under £15,000 of unsecured debt, no more than £50 per month disposable income and assets of less than £300.

If you are struggling with debt, always seek the help of a specialist agency such as the Consumer Credit Counselling Service (CCCS) or the Citizens’ Advice Bureau. These will be able to offer you free advice regarding the best way to solve your debt problems.

Free debt consolidation advice

There is an enormous amount of free debt consolidation advice online, offered by a wide range of providers. It should be easy to find out what you need to know before making a firm decision to consolidate your debts into one loan or mortgage. But bear in mind that advice from the companies who actually sell the products isn’t independent and might not give you the full picture. Make sure you are aware of the downside as well as the advantages!

Independent guidance

For totally impartial free advice, try your local Citizens’ Advice Bureau or consult registered UK charity the Consumer Credit Counselling Service at cccs.co.uk

Free quotes

Almost all debt consolidation suppliers offer free quotes. Depending on the kind of consolidation you want, some require a simple online form and others need more detail. Quotes are almost always given without any obligation, so you can’t be forced to stand by what you’ve been quoted unless you really want to.

Get free debt consolidation advice and quotes

You have a great choice of providers. Here’s a selection to kick start your search for free debt consolidation information, advice, support, guidance, estimates and quotes:

• Debt Advisory Centre
• Debt Advice Bureau
• Insolvency helpline

Please let us know whether you have found any other free debt consolidation services.

Debt consolidation loans are common but the debt consolidation mortgage is less so. However, many people find the debt consolidation mortgage the ideal product to get them out of financial trouble.

The advantages of mortgaging for debt consolidation

A debt consolidation mortgage involves taking out one large loan – a mortgage – in order to pay off all your other loans and debts and bring all your debts under one affordable monthly repayment.

Interest rates on mortgages are usually lower than for unsecured borrowing. So a mortgage for debt consolidation usually features lower interest rates.  You can even apply for a debt consolidation mortgage if you’ve had credit problems in the past.

Council of Mortgage Lenders (CML) research points out that a massive two thirds of people in financial trouble end up with a debt consolidation mortgage. About 30 per cent of Brits with a debt consolidation mortgage felt it had improved their credit status. But 8 percent claimed their financial situation had worsened as a result.

Debt consolidation mortgages can help you:

• Avoid repossession and bankruptcy

• Stop creditors from hassling you and reduce stress
• Reduce your monthly debt repayments up to 60% compared to your original repayments

The disadvantages of consolidating debt with a mortgage

A debt consolidation mortgage usually runs for longer than the loans you want to clear. So you will pay much more interest in the long run. But if you avoid financial crisis as a result, it can be worthwhile.

Where do I apply?

Find a specialist debt consolidation mortgage broker. They will advise you whether debt consolidation is the best solution for your circumstances.

There are plenty of reputable specialist mortgage brokers online. Here’s a handful. You might find that a local internet search points you towards a specialist in your local area.

• Ocean Finance
• Adverse Mortgage Centre
• Mortgage Savings Centre

It is also worth keeping an eye open for suitable adverts in local newspapers. Alternatively, check Yellow Pages: yell.co.uk.

We would like to hear from anyone who can recommend other good debt consolidation mortgage brokers.

In tough financial situations it is best to get back to basics and create a budget. Then you should be able to pay all your bills and possibly save some money. Look at all your expenditure and ask your self can I go without or can I reduce the cost of this expense.

We found an interesting, controversial blog post from MoneySavingExpert.com on the best way to save money in difficult economic times.

The banks are saying that debt consolidation is the answer and on the surface this appears to be good financial advice. But is there a better way to help people save their money. Martin Lewis from MoneySavingExpert.com believes that cutting the cost of debt is the answer.

Do you think that debt consolidation is the best way to help save your money in difficult financial times or is cutting the cost of debt the answer?

Over the last two decades we’ve become used to using our credit cards for anything from regular household expenses to emergencies to treats. The problems arise when we have to repay credit card debts. Getting into the habit of only paying off the interest on your credit cards each month can quickly lead you into real financial trouble. And the interest rates on credit cards can be crippling.

If, like many people, you have several credit cards, things can soon get out of control. It doesn’t take long to get into serious debt. Credit card debt consolidation is one way to get out of trouble fast.

•    When you consolidate credit card debt, you take out a single large loan which you use to pay off all your credit card debts in one go. This leaves you with just one monthly repayment, to one creditor.

•    Better still, most credit card consolidation products include a choice of repayment terms. So you can choose to repay your new loan over six months, a year, two years, five years etcetera. Doing so reduces your monthly repayments to a level you can afford.

Find the right credit card debt consolidation loan

There are literally hundreds of card debt consolidation products on the market. So it is a good idea to spend the time finding a consolidation loan that meets all your needs. Interest rates vary and different loan companies offer different deals.

The easiest way to do this is to use a price comparison website, which will compare the market for you in seconds. Otherwise, it could take days to winkle out the best deal!

MoneySuperMarket.com
TotalMoney.com
BeatThatQuote.co.uk
MoneyExtra.com
MoneyExpert.com

Before you consolidate credit card debt…

If you already owe money left, right and centre, credit card arrears can tip the balance.  Many people find that credit card consolidation helps them get back on their feet and avert a real crisis.
But before you sign up for credit card debt consolidation, think about switching all your credit card balances to one interest free credit card. You might find that switching to an interest free credit card – for as much as a year – gives you the breathing space you need to break free from credit card debt.

ThinkMonkey.com – Great article on credit card debt consolidation.

•    Along the same lines, a poor credit rating can take years and years to recover from, so take your current situation as a good lesson learned and avoid having to resort to loan sharks next time round.

•    Taking longer to pay off the loan isn’t always a good thing. It may mean you increase your total debt quite dramatically and cost you a small fortune in the long run. So weight up all the pros and cons first.

•    If your consolidation loan is secured on your home, or on anything else you own, you risk losing it if you default on repayments.

•    Some loan agreements insist that a responsible, financially secure person co-signs the paperwork, guaranteeing the loan. If you miss your repayments, they become legally liable for the money you owe. Not a good way to win friends and influence people, and worth avoiding!
Using secured and unsecured loans to consolidate debts, you’ll find that there are two types of debt, secured and unsecured. Secured lending uses your property as security, so it is only suitable for homeowners. If you default on your repayments you risk repossession. Unsecured lending isn’t secured on your home, so usually has higher interest rates.

Intelligent planning equals successful debt consolidation
•    Don’t get into any more debt
•    Plan your expenses
•    Make common sense economies
•    Create a sensible budget
•    Stick with your budget, no matter what.

This might sound challenging. But if you’ve been struggling with debt and worrying for weeks, months or even years, getting things in shape will probably feel pretty good!
Get impartial advice about debt consolidation at Debt Watchdog: DebtWatchDog.com

Always talk things through with an expert before consolidating debt. An independent financial advisor (IFA) should be able to help. Find a good one at:searchifa.co.uk or ifa-guide.co.uk