We will all require help with our debt at some point in our lives, and it seems that nowadays more of us than ever before are very much in need of it. There are a few options that can help you either cope with your current level of debt or actually help in reducing your debt.

First of all, you will need to account for your money. If you do not know where it is going once you have earned it, it is little wonder that you are in a spot of financial trouble! By doing this simple exercise you will see one of two things;

a: If your outgoings exceed your income or,

b: If your income exceeds your outgoings!

Straight forward stuff really, but it's amazing just how many people don't do this and as a result have no idea what their money is doing. For example if after doing this simple little exercise you find that you are earning enough to cover your outgoings then you know that the problem is that of money mismanagement and therefore you will have to devise a strategy to manage your money better. Once you have done this you will be amazed at just how quickly you can get back on track.

If however you find that your income does not meet what you need to cover your outgoings then your situation is a lot more serious and a plan of action is required in order to reduce those outgoings. This is the first step in the process of debt consolidation.

The second step is to work out which solution is best for your personal situation. There are many different options available to reduce your debt from debt management companies to consolidation loans and each one provides a solution to an individuals' distinct set of circumstances.

Here are a few possible debt reduction solutions and the personal circumstances they are best suited for:

Option 1: The Secured Debt Consolidation Loan:

If you have equity in your property this can be used to apply for a loan with which to consolidate all of your debt. This option gives you the best opportunity to reduce your monthly outgoings, especially if you can deal with your creditors independently; I will expand upon this in a moment.

The Benefits:

• Your credit score, although still important, does not have as much of an impact on the result of your application as it would with an unsecured loan.
• The interest rates applied to secured loans are amongst the lowest rates for any loan
• Your debt becomes much more manageable because you will only have the one payment.
• Because of the low interest rates your monthly outgoings will be cut drastically.

And the negatives

• Because you will usually be using your property as collateral there is the risk of losing your home should you fail to make payments.
• The term of your loan may well be longer than the terms applied by the debts it has been used to consolidate. This means that over time you may actually pay more.
• No collateral , no loan!

If you can negotiate lower settlement figures with your creditors prior to applying for your loan you could save yourself a lot of money as you will then need to borrow less to consolidate and this will reduce your monthly payment further, this also applies to an unsecured loan.

Option 2: The Unsecured Debt Consolidation Loan:

Unfortunately, unless your credit score is exceptionally good and you have an extremely secure job, the likelihood of successfully applying for a unsecured debt consolidation loan is extremely poor. This is mainly due to the aptly named 'credit crunch', if however, you are one of those fortunate enough to have an application approved these are the pros and cons:

The Benefits:

• Much lower interest rate than credit cards and other usual forms of debt but usually not as low as a secured loan.
• No collateral required
• Plenty of flexibility with regards to the term of the loan meaning you can adjust it perfectly to what you can afford.

And the Negatives:

• Very difficult to be approved for at this time; those likely to be approved are those who don't really need the loan anyway!
• Your credit score plays a large part in the approval process, anything less than perfect forget it!

Option 3: Debt Management Companies:

If you have no collateral to offer a lender or your credit score is nowhere near good enough to obtain an unsecured loan then a debt management company may be able to help. These companies operate by negotiating reduced payments with your creditors. You will then be asked to make the payment to the management company who, in turn, distributes the payment to your creditors.

It is probably wise to use government affiliated companies as these tend to have the best results.

The Benefits:

• These companies use expert negotiators who have long standing business relationships with your creditors, as a result they often manage to get greatly reduced payments.
• You don't have to deal directly with your creditors anymore.
• Monthly payments can be reduced by up to 50% in the best case scenarios.

And the Negatives:

• There are too many rogue companies that will scam you, taking a fee each month and saving you very little or nothing at all, and possibly not even paying your creditors.
• You relinquish total control of your debt.
• Any savings you do make are lost in charges and management fees.

Conclusion:

These three methods of debt reduction are probably the best known and the reason for that is that they are also the most successful, but before making any decision it would be prudent to seek advice from a debt counselor; they offer free advice and will be best placed to advise you on your best options and may also be able to assist you.