Getting to grips with how much money you owe is often very sobering, and not a little frightening, but the first step to take is to look at all your paperwork and calculate exactly how much you owe.
Only by finding this out will you know if debt consolidation is going to be the most appropriate route. Once the total debt has been established, you will need to make a detailed monthly budget that includes all regular outgoings, however small.
In the interests of accuracy, the best way to make a reliable budget is to keep receipts for everything you spend during a month, or note down the details of your spending. Once you have paid all the essential household bills (without including the existing unsecured debt repayments), any money remaining can go towards repaying existing borrowing or paying off a new consolidation loan.
If you have any savings, some or all of them may be better spent on paying off existing debt, especially as credit interest rates are currently so low. One of the dangers of consolidating your debts is the temptation to borrow more than is necessary when taking out the new loan, so this is also something to watch out for.
It is worthwhile checking your credit rating, as this will affect whether you are offered a secured or unsecured consolidation loan. Secured loans are often offered to people with a poor credit history, but caution should be taken because the loan will be secured on your home. Other criteria that lenders consider include the size of the loan requested and your repayment history.
Early repayment charges may apply on some of the existing borrowing, so don’t forget to check for these and include them in the new loan amount if applicable.