It is probably fair to say that for most people who experience serious debt problems, the first thing they think about is where to get some more money to pay off their creditors. Taking out one big loan to pay off old debts is known as debt consolidation, and while this can be a useful thing to do in certain circumstances, it is by no means always the most effective solution to solving many debt problems.
It partly depends on the size and nature of the debts you have, but if you have quite a serious amount of unsecured debt, then there are definitely options available which are better than borrowing more money. Unsecured debts are those which are not legally tied into one of your assets, such as a house. Things like credit card debts, personal loans, store cards, bank overdrafts, etc are all examples of unsecured debts.
In both the US and the UK there are many companies which specialise in debt settlement and debt management. These involve negotiating with your creditors on your behalf, to agree new repayment terms for the debt. This usually includes securing an agreement by the creditors to write off a substantial portion of the original amount owed, in some cases over half of your debt. The advantage of this approach over that of a consolidation loan is that it reduced the whole balance due, rather than just decreasing the amount of interest you pay. You therefore have a lot less to pay back, which allows you to be debt free that much sooner.
In the US, Debt settlement negotiation or debt management programs are frequently used as an alternative to bankruptcy. They are ways of dealing with substantial debt without incurring the serious legal consequences that come with bankruptcy. In the UK there are many companies who offer debt management plans, which involve making a single reduced payment to the company, who in turn negotiate and deal with all your creditors.
Another useful alternative to either borrowing more or declaring bankruptcy, which is only available in the UK, is an Individual Voluntary Arrangement, or IVA. This is a more formal, binding agreement, which again involves making a much reduced single payment to a company who then deal with your debts on your behalf. At the end of the agreed period, any unpaid debts are usually written off and you are free of debt
The difference between an IVA and a debt management plan is that with a debt management plan your creditors do not have to agree to it, whereas with an IVA, if you can get 75% of your creditors to sign up, the rest are obliged to join in, whether they like it or not.
IVAs were first introduced as an alternative to bankruptcy, and they are certainly a far more attractive option. When you declare bankruptcy you lose all control of your assets, whereas an IVA gives you some involvement and choice about which debts are included and which are not. IVAs and debt management/settlement programs are all aimed at unsecured debts, so things like your mortgage or any secured loans cannot be included.
Whether you decide to look into a debt consolidation loan or a debt settlement company, it is important to talk to more than one company, and to ensure that the companies you do approach are well established and reputable. The danger is that less reputable companies may offer you solutions based on what will make them the most money, rather than what is best for you. Good companies will have a good track record of successfully helping people and will offer you the best options for your particular circumstances.