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Consolidating bills is not an easy task, especially if you have a lot of debt.  The more debt you have the harder you may find it to obtain a debt consolidation loan at a low interest rate.  If you are not careful when selecting a consolidation loan, you could end up deeper in debt.

As you are searching for a consolidation loan, you must make it your goal to search for a loan that will lower your overall costs.  To accomplish that, you will want to find the lowest interest rate possible and have a plan to pay off your debt in three to five years.

Using credit cards to consolidate your debt is one type of loan that you can use if you do not have a large amount of debt.  Consolidating your debt on a credit card will require you to find a card with enough credit limits to cover the entire amount of the debt.  If you take out a personal loan for less than £2,000 you may find that the interest rate will be higher than if you take out a larger amount.  So if you require a loan less than £2,000, you may want to consider a credit card, because if you have a good credit rating, it will be likely that with a credit card you will be able to find a low interest rate, or a 0% introductory interest rate.

Another way to consolidate your loans is through a traditional debt consolidation loan.  A consolidation loan is sometimes an unsecured personal loan that does not require any security and is considered a risky loan to lenders and are usually more expensive and not easy to get if you have a lot of debt.  A secured personal loan will require you to provide collateral, such as your home, which can prove risky to you if you are not sure if you will be able to meet the monthly repayments.

You could also seek credit counselling or debt settlement, where you will have the assistance from agencies that will negotiate with your lenders to lower your monthly payments.  They will also help you to build a budget and come up with a financial plan to help clear your debt.  However, these services come at a cost, although there are agencies that do not charge you, you will end up paying with a bad mark on your credit rating.

If you find that you are in debt that is becoming hard to manage and find your debt spiralling out of control, you should consider getting expert advise on how to handle it.  If you are in debt, the best place to seek expert advice is from a credit counselling company.

Many people who find themselves losing control of their finances or find that they have too many bills that they are unable to keep track of and are falling behind on payments, often think that a debt consolidation loan is the answer.  Often times it is, however you need to know what loan is right for you and whether or not another loan is necessary, that is where a credit counselling company comes in.

Credit counselling companies offer you debt consolidation advice with tips on how to manage your credit and also help you to establish a budget that will suit your lifestyle and your needs.  They will also help you to keep track of all your bills and teach you how to manage your money properly.  The advisors who work for the credit counselling companies are well trained and certified financial professionals who are familiar with debt consolidation.  Because they are familiar with debts they are able to give you customised advice to help you resolve your debt and gain back your financial security and freedom.

There are many debt consolidation companies out on the market, but you have to be wary of who you choose.  Often times the ones with the most advertising isn’t necessarily the best company.  It always pays off to take your time and search for a company that you feel will suits all your needs and have your best interests in mind.  Always arrange a consolidation meeting with an advisor face-to-face, it is never wise to arrange or organise your financial situation over the phone.  There are non-profit credit counselling organisations that will be able to assist you, and are worth looking into.

Whatever company you choose, you want to be sure that you feel comfortable and confident that they will help you.  You need to remember that they will not make your debt go away quickly, they will just assist you and teach you the right methods on consolidating your debt and managing your finances.

Despite the fact that Consumer watchdog groups have been warning consumers to be careful, this month will see thousands of UK consumers turning to debt management schemes that will, possibly, cost them everything in the end.

“We often see people that have taken out a consolidation loan,” Meg Van Rooyn, information officer for National Debtline, told BBC News Online in 2003.

“A major danger is that people tend to look at how much they borrow not how much they will pay back in total.”

Prior to this, in December 2001, the Office of Fair Trading (OFT) established guidelines for the debt management industry.

The OFT dictated that firms needed to conduct a thorough review of clients’ financial position, reveal their fees upfront, and not mislead consumers into thinking that repayment of their debts would improve their credit rating.

In 2003, The Consumers’ Association mystery shopped seven leading debt management firms, all failed the OFT test in one or more ways.

In one instance the charges that the management firm would impose were larger than the debt repayments.

With the introduction of IVAs, it became more difficult for consumers to find a responsible method of reducing their debts.  Many are paying exorbitant fees for a service that garnishes their money for five years, and still leaves them with no credit rating.

One word of caution is being whispered by debt consolidation and debt management firms in the UK, buyer beware.  They are warning consumers to take time to find a good firm.  Never be ‘sold’ by a fatherly or motherly salesperson who treats you like family.

Instead, the best way for consumers to avoid bankruptcy is to shop around, ask for advice, and take their time.

The national charity Citizens Advice is advising UK consumers to take charge of their spending habits and debt early in 2007.  However, they admit that these are not the only causes of debt problems.

Last year Citizens Advice bureaux dealt with more than 1.4 million debt problems. This equals 5,300 debt problems every working day.  The charity claims that these  figures will rise in 2007.  The question is who will be hit hard, and who will not feel the pinch.  There is no logic to the numbers. Many high income households are petitioning for insolvency while millions of low income households are asset-rich and safe from a financial disaster.  The answer is not in income, debt load, or employment. The answer is in money management.

Citizens Advice believes people pay a high price for their ignorance and ill-informed debt management and personal loan choices.  Consumers who are unconfident when making crucial financial decisions are also in the high risk category. For many of these people, the Christmas debt ‘hangover’ will turn into a nightmare because these people will ignore the problem until it is too big to manage.

Ignorance is the number one reason why consumers are turning to IVA companies to find debt relief. This is the worst way to manage a debt problem, because the companies who advertise these ways make their profit from handling debt burdened consumers.  These companies have everything to gain from indebted consumers and nothing to gain from financially savvy borrowers.

The Debt Counsellors, debt advice organisation, produced a report to heighten public awareness of the problems associated with debt management programmes.

The total personal debt in the UK exceeded £1.28 trillion as of the third quarter of 2006.  This is increasing by £1 million every four minutes. While reports by the Bank of England show that the country’s alleged ‘mountain of debt’ is not as formidable as most people believe, many consumers are searching for ways to reduce their debts.

Debt management programmes are preying on the vulnerable. This is most common in debt management companies where the finance company takes control of the consumer’s debts. In turn, they deal with creditors in return for a monthly fee, fees for late and missed payments, and extra fees if the consumer takes a part-time job, or participates in overtime.

The Debt Counsellors’ Debt Management Report stresses that consumers need to seek professional debt counselling advice before signing these agreements.  Many of these programs, including IVAs, compound the debt problem.

John Porter of The Debt Counsellors explains: “Debt management programmes can appeal to people struggling with bills but some deals work out more expensive in the long run than the original debts because of higher interest or longer repayment periods.”

The Debt Management Report explains the dangers of debt management programmes and offers alternative solutions to serious debt problems.

Porter adds: “We strongly advise anyone considering a debt management programme to get professional debt help first. The Debt Counsellors give free, confidential advice on debt problems and can explain all the options available.”

HSBC, the UK’s largest bank, sees no indication that the UK consumer will grow tired of using IVAs to release them of their loan burdens.

The bank’s 2006 pre-close trading update reveals the results of the trend ‘seen since the second half of 2005.” No research indicates that the use of IVAs to pay off loans will abate in the next six months. This has led the banks to call on the government to step in and stop the drastic increase in bad debts.

Bad loan injury jumped 36 per cent. In the first nine months of 2005 the people who defaulted on loans jumped 65 per cent, to a total of 77,000. This is according to the Insolvency Service.

Record numbers of UK consumers are declaring bankruptcy or entering into individual voluntary arrangements (IVA). The major lenders in the personal loan and credit card markets are accumulating huge amounts of bad debt.

HSBC said: “ On a year-to-date basis, underlying revenue growth slowed, attributable largely to the aggregate of seasonal variations in fee income, a conscious decision to slow the rate of lending growth in more finely priced markets, fewer disposal gains and a weaker trading performance in CIBM in the third quarter.”

According to HSBC, “ Increases in short term interest rates will impact borrowers who have adjustable rate mortgages that are now resetting. In addition, further weakness in the housing market, lower consumption and lower employment also pose potential risk.”

Analysts predict that the bubble will burst when enough UK consumers report that IVAs are ‘ten times worse’ than bankruptcy, with the same financial difficulty attached, afterwards, but with five years of ‘living in hell’ before the debt is released.

UK singles are struggling under the burden of the high cost of housing, utilities, and expenses, on a single income. This is confirmed in The Debt Counsellors Debt Help Survey 2006.

The new report reveals that divorced, single and separated consumers are vulnerable to serious debt. The first instinct of those struggling with bills is often to consolidate their debts. This can result in a panic situation causing them to consolidate affordable personal loans into an expensive AVI.

Consumers are not aware that there are good debt consolidation deals. They are drawn to the popular methods that are advertised on the television and in newspapers. They do not realize that two debt consolidation packages can look the same, but in the end, one will cost thousands of pounds more.

John Porter of The Debt Counsellors said: “Single people often struggle with debts and debt consolidation can seem appealing, but careful consideration is necessary and The Debt Consolidation Report is ideal for finding out more about the subject.”

The purpose of debt consolidation is to find relief for over indebted consumers. However, the recent ‘predator and prey’ attitude of the debt relief firms has caused the Office of Fair Trading to step in.

Current news reports are rife with stories of consumers who sold their homes to pay off debt, before looking into alternatives like secured loans.  The fact that many singles are younger, or that they were in a marriage situation where another managed the finances, is leaving many households burdened with the responsibility of managing the finances, but without practical experience, or with enough knowledge to manage finances in the midst of an emergency.

Shadow Chancellor George Osborne unveiled a plan to tackle soaring debt and financial exclusion at a recent Conservative Debt Summit meeting in London. Many of the proposals in this plan have been proposed by debt management organizations for some time. This plan will be researched by the Conservatives in collaboration with the Citizens Advice Bureau and other organisations.

He went on to say that this isn’t just  problematic for people who find themselves caught up in rising debts, but rather it could be a problem for everyone. He also said “An economy built on borrowed money is an economy built on borrowed time.”

Consumers sign up for these ‘impulse buy’ items without understanding the ramifications of the store’s program.

The summit examined a series of proposals. The plan may include a seven-day cooling off period for store cards. This would give them the opportunity to really think about their spending habits.

There is also a request for credit card providers to inform the public, in layman terms, about charges involved and a proposed introduction of a debt action plan to encourage greater corporate and social responsibility.

This last proposal was directed at the summit audience which included leading figures from the charity, consumer protection, and financial services sectors.

Mr. Osborne addressed them directly when he spoke of the “social responsibility” of debt and financial exclusion, urging the government, organisations and individuals to work together.

The summit also looked at a proposal that mimicked the government’s plan to encourage financial education at the grade school level.

A new research reveals that the Welsh population is unwilling to share their financial problems with anyone, including friends and family. However, people in the north of England are extremely private about their financial situation. The issues in this research included topics like savings, both secured and unsecured loans, credit cards, and debts. UK adults are more concerned about their financial privacy than they are about receiving professional advice and solutions to their debt problems.
Chief Executive of First Direct, Chris Piling said, “At first direct we make a point of understanding that most people may suffer financial difficulties at some point in their lives and it’s absolutely nothing to be ashamed of.”

He further added, “In fact, with us a problem shared can be a problem halved and we want to encourage customers to speak to us before things get out of hand.”

IFA Promotion, who promotes the benefits of independent financial advice, suggests that 21 per cent of UK adults plan to address their financial problems in the New Year 2007. This is far less than the percentage of UK adults who are currently struggling under an unmanageable debt.

Programs set up by the Government and consumer credit watchdog groups have been set up to address the problem, and hopefully encourage consumers to seek advice.  Consumers are also encouraged to talk to banks.  It is not necessary to apply for a loan at a bank, or a financial institution, all the consumer needs to do is ask for advice and listed. This is the first step to acquiring a basic understanding of how loans and debt management companies work and shedding their fear of discussing financial problems with others.

An article on the Motley Fool gives credit card holders advice on what to look out for with credit cards. This could help card holders to save or make some money. Although many credit card issuers are now charging balance transfer fees of between 2 and 3 per cent, there are still some free balance transfer cards from Britannia Building Society and Sainsbury’s Bank. The trade off is a shorter 0 per cent period.

When shopping around for a credit card consumers also need to be aware of uncapped balance transfer fees, which could add hundreds to the cost of transferring a balance. The way payments are allocated can also affect how financially effective a particular credit card is. Card issuers often assign payments made to pay off the cheaper debt first, meaning that any 0 per cent balances are cleared before any higher rate spending. This means that people could find themselves making unexpected interest payments.

Finally, the article advises cardholders to check the terms and conditions. Some credit cards which appear to have a long term 0 per cent rate require cardholders to qualify for the discount by spending some money first. This ensures that the lenders make some interest, but makes the deal less appealing. The article suggests that cardholders look for cards with capped balance transfer fees, if fee-free ones are not available. They should also check the terms and conditions to see what they will really have to pay. And they should check to see how payments are applied on the card.