With the credit crunch hitting the UK economy, many borrowers and homeowners are feeling the squeeze of rising rates and unmanageable bills.

As more borrowers are struggling with debts - made up of credit cards, rises in energy bills and complications surrounding self-assessment payment deadlines, the numbers of calls to debt consolidation companies and charities that specialise in financial problems have increased as well.

January is usually the month when bills and festive debt take hold and affect finances for the year. And as more of us are now turning to debt management companies and considering taking out a debt consolidation loan in order to help us survive the financial year.

Insolvency firms have seen an increase in inquiries as householders turn to debt consolidation in an attempt to manage bills and avoid the threat of bankruptcy.

Many turn to Individual Voluntary Arrangements (IVAs) as an alternative to bankruptcy. These plans are popular with some debtors as it allows for flexibility of repayments over a period of around five years.

However, financial assistance charities advise borrowers to seek advice before committing to such plans. According to industry statistics, the average IVA debt was around £50,000, however this figure is expected to rise during 2008 as borrowers and banks alike struggle to cope with the ongoing credit crunch.

Whilst IVAs can offer a remedy for those seeking help with consolidating their debts, only a limited amount of circumstances are available, and are often not the best solutions for most debt scenarios.

For those considering debt consolidations, the advice seems to be to plan your finances for the year ahead, and if you do require a loan to consolidate your debts only borrow what you are certain you can afford.

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