If you watch daytime TV for an afternoon you can't fail to notice the huge number of adverts for loans that crop up between programmes.

These ads claim that they can solve all your money problems by consolidating all your debts into “one simple monthly payment”, which is lower than the payments you are currently making. The adverts also boast that when you consolidate your loans like this, you also get the chance to borrow more at the same time to spend on whatever you like; a new kitchen, car or holiday for example. This message is invariably accompanied by a cheesy visual of a chuffed customer revving the shiny new motor he’s just purchased with his miracle loan.

But is it really that easy. And is it ever a good idea?

Putting it all together

If you consolidate a loan with one of these companies you may find that you are paying a lower interest rate than you were on your credit cards. But there are good reasons for this.

The repayment of the loan is spread out over a much longer period, meaning the total amount of interest you pay is usually either equal to or more than you would have paid anyway, despite the lower rate.

The other, probably more important point is that most consolidators offer their services only to UK home owners. This means that the loan is 'secured' against your home and if you cannot pay it back your property may be in danger of being repossessed. Because the lender can claim against your property in the event of you defaulting, they can offer cheaper rates than on an 'unsecured' credit agreement such as a personal loan or credit card.

Adding the debt to your mortgage

While for a small niche group of people in very specific circumstances secured loans may be the right option, in most cases they are not and debt problems can be tackled in other ways. In some circumstances, the debt could simply be added on to your mortgage by remortgaging and taking a further advance. The interest would be payable at a much lower rate and you may be able to pay it off more quickly.

Taking out an unsecured loan

If, after assessing your financial situation, you decide that some kind of loan is the best option for you, there are a number of alternatives available. As well as banks and building societies, there are a raft of loan companies on the market, some of which operate solely online to keep costs down to a minimum.

When choosing a loan, it's not just a good interest rate or APR that you should look for; early repayment penalties and costs for payment protection insurance (PPI) also need to be taken into account before taking the plunge.

Seek help

Anyone who is in debt crisis should seek help from one of the free debt counselling charity services like the Consumer Credit Counselling Service, National Debtline or the Citizens Advice Bureau.