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Is debt consolidation one of your New Year’s resolutions?

Some simple steps to get your finances back on track

Is debt consolidation one of your New Year’s resolutions?
Is debt consolidation one of your New Year’s resolutions? (image: Pixabay)

If you’re thinking about starting your own business, one of the first pieces of advice that most people will give you is to ensure that your financial foundations are as strong and stable as possible.

Improving your credit score, and impressing potential lenders, requires you to be able to demonstrate that you can effectively manage your finances, that you can pay your bills, and meet your obligations.

However, if you’re finding it hard to do this, you should probably think about consolidating your debt.

What is debt consolidation?

Essentially, debt consolidation is about making things simpler. If you’ve got numerous credit or store cards, maybe a personal loan or two, possibly some car finance or other lines of credit, you’re probably finding things a bit overwhelming.

Debt consolidation is the process whereby you bring all your different existing debts into a single facility. For example, you might transfer all of your current credit card balances onto a new credit card (and close all the previous accounts), or you might take out a personal loan and collapse all other debts that you’ve got into that.

Most financial service providers will have a specialist range of products designed for debt consolidation. They should be able to demonstrate how they can save you fees, charges, and interest, as well as simplifying your monthly repayment requirements.

Another term for this process is debt relief.

Debt management and debt settlement

Debt consolidation only works if you have sufficient income to meet the monthly repayment requirements of the new loan facility. If things have got a bit more out of hand than that, then you might need to consider some other types of debt relief.

Debt management is a process whereby you see the help and guidance of a speciality debt counselling company. These specialist advisers will help you build a personalised debt relief plan based on the budget that you’ve got available.

Debt settlement is a step further – this sees a third-party or specialist debt-settlement company negotiate current debt obligations with the relevant creditors.

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