If you are keeping track of multiple unsecured debts and would like the chance to lower your monthly expenditure and/or make your finances easier to manage, then a debt consolidation loan may be right for you.

Like with most things, there are advantages and disadvantages and is important to pay attention to them and apply them to your personal circumstances. Not everyones financial situation is the same and so a debt consolidation loan will not be for everyone.

What does debt consolidation involve?

- Debt consolidation involves taking out a new loan and using it to pay off all your unsecured debts in one go. After this has been done, you will begin repaying your loan to your new creditor on a monthly basis - meaning that instead of making several payments to several creditors each month you will now make just one, which should simplify your financial situation.

- Debt consolidation could also help you reduce the amount you spend each month. Some people, when consolidating their debts, arrange to repay their debt over a longer timeframe, which means that each monthly payment will be smaller. It is important to note, though, that if you arrange to do this, you may end up paying more overall - as your debt would be accumulating interest for a longer period of time.

- However, if you arrange to consolidate debts with a high APR (Annual Percentage Rate), such as credit cards, the interest charged on your consolidation loan could (in some cases) be significantly lower. This means you may be able to save yourself money in the long run as well as on a monthly basis.

How do I know if a debt consolidation loan is suitable for me?

A debt consolidation loan could be suitable for you if:

1. You would like to make your existing debts more manageable.
2. You are as sure as you can be that you will be able to repay your debt within a reasonable amount of time - but would like the chance to simplify your finances and/or reduce your monthly expenditure.
3. You are able to consolidate all of your unsecured debts.
4. You don't have an erratic income.

If you're wondering whether a debt consolidation loan may be right for you, reading through a checklist in itself isn't actually enough to give you more than just a rough idea. Everyone's circumstances are different and it's important to get personalised advice from a professional debt adviser before making a decision.