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Is debt consolidation the most fitting debt solution for me? As we are in a recession (according to the Ernst & Young ITEM Club Autumn forecast), there’s a real need for people with problems with debt to realise the differences between debt consolidation loans and the various other debt solutions available – and realise which one could be the best solution to suit their needs.

Firstly, it depends on what happens in the future. In a recession, it’s more likely than usual to be bad news – when consumer spending lowers and companies lose money, many businesses are forced to make people redundant just so they can stay afloat. For any individual who’s pretty sure their company is thinking about making redundancies, a debt consolidation loan might not be a good idea.

Why? One of debt consolidation’s best advantages is the opportunity to bring down the monthly amount an individual pays in debt repayments. A consolidation loan has a bigger impact when the person is in a reasonably stable financial situation: when they are aware how much they’re earning and how much they are spending every month, they are able to figure out the number one way of paying back their debt.

So a person facing the possibility of unemployment would perhaps be better off looking into managing their debts, rather than debt consolidation. Debt management offers a flexible approach to debt: borrowers could ask debt management experts to talk to their creditors on their behalf, asking them to think about allowing reduced monthly payments, remove charges and/or freeze interest.

Individual Voluntary Arrangements, which are an alternative to bankruptcy, need a lot of commitment and need homeowners to release some of the cash tied up in their home. Borrowers must be able to commit to making fixed monthly payments for (most of the time) six years, based on the most they are able to afford once they’ve taken their needed monthly costs into account. Even so, an IVA might make all the difference – for individuals whose debts have gradually got out of control, as well as people faced with a severe fall in their earnings. Granted, IVAs do need a level of financial stability: if the person does not feel they can commit to five years of regular payments, an Individual Voluntary Arrangement might not be the best debt solution for them.

Find out more about debt consolidation and alternative debt solutions, including bankruptcy advice.