So many people believe that a debt consolidation loan is the way out of their financial crisis. I hear it time and time again, ”If I could only get a debt consolidation loan, all my problems would be solved!”

There is no doubt this popular view has been developed over years by clever, persuasive marketing executives.

There are many companies that promote debt consolidation loans as the one and only best cure to the debt disease. Be aware though that debt consolidation loans are not always the best or only cure for that matter.

For years we have been sold on the idea that by rationalizing the debts together into one, easily manageable repayment it would be cheaper. This is not always the case.
Many debt consolidation loans have expensive (non-refundable) application fees, pricey ongoing fees and high interest rates not to mention any penalty fees and charges that the banks these days love to charge.

In this way, all the fees and charges and ”hidden/unexpected” costs all diminish the benefits a debt consolidation loan may have.

It is also worth considering that when you get a debt consolidation loan, the debts don’t disappear.

Essentially, when you get a debt consolidation loan, you are effectively swapping bad debt for different bad debt. The net result is that you still have the debt but it’s morphed into a different creature which is potentially equally oppressive to your budget. The phrase ”out of the fry pan and into the fryer” holds true in this case.

Nevertheless, let’s assume that a debt consolidation loans is the right thing and ticks all the boxes as far as delivering to you a debt relief solution. These days, debt consolidation loans are not easy to get.

Thanks to the global economic crisis, the availability of credit has become limited which means that credit providers are scrutinizing every single application with a fine tooth comb. This means that if you have ever paid a credit card late, or have insufficient assets or too much debt compared to your income, or self employed then it’s pretty unlikely you will be approved for a debt consolidation loan by a bank — and if you have any credit impairments, well forget about it because a loan is just not going to happen.

In lieu of a bank, there are always finance companies however as soon as you start to look towards credit providers that have a more relaxed approach to credit assessment, then the interest rates will be a lot higher and if this is the case, what’s the benefit in trying to get a consolidation loan at all?

For a great number of people, this scenario is typical and extremely frustrating — but there is hope.

Firstly, you need to speak with a debt consolidation expert to properly assess your position. You need to hear about all your options - not just loans. You need to look at your lifestyle and consider what you want to do in the future. For instance, do you hope to buy a house within five years?

You need to take a practical and pragmatic approach and consider all your choices, weighing up the benefits and consequences of each option and then deciding on the best course of action.

My advice is to stay calm and don’t panic and be open to any suggestion that will help you reach your goals and deliver relief to you now.