Living frugally is all about saving money by living more 'simply', which in turn could make your budget stretch that bit further every month.

Simplifying your finances whenever it's suitable to do so can be a great idea - and this could particularly be the case if you're trying to live a thrifty lifestyle and also repay your unsecured debts.

One possible way of doing this is by taking out a debt consolidation loan. But how could that help you to pay back your debts every month and help you take a more frugal approach to your finances?

What is a debt consolidation loan?

Taking out a debt consolidation loan is one possible way of simplifying your debts by bringing them all together. It's a new loan you could take out to pay off your existing unsecured debts. By doing this, your multiple debts would effectively be 'collapsed' into a single debt, which you could then repay with a single payment every month - to a single lender.

A debt consolidation loan wouldn't be suitable for anyone with serious debt problems - in which case, another debt solution such as a debt management plan could be a more appropriate way of tackling debt - and you must be able to afford both your monthly repayments towards your consolidated debt and the total amount you have to repay.

However, when considering any debt solution, it's important to find debt consolidation help and advice before deciding on the best approach for your circumstances.

How could debt consolidation help me to live frugally?

Consolidating your debts with a loan could help to simplify your finances in several ways - which in turn could help you take a more thrifty long-term approach to how you service your debts.

Many types of unsecured debt, such as credit cards, can come with high interest rates, which can increase the total amount you have to repay. If you can find a debt consolidation loan with a lower interest rate than the ones on your multiple unsecured debts, you could reduce the amount you repay overall.

Furthermore, you could reduce your outgoings every month by making smaller repayments to your loan. However, agreeing to a longer repayment period means could cost you more overall, as you'll be paying interest over a longer period too. You'll also remain in debt for a longer time. So if you're looking to save money in the long term, this isn't likely to be the right approach.

On the other hand, you could arrange to make larger repayments every month that you still know you can afford - and though you'll be increasing your outgoings on a monthly basis, by reducing your repayment period you'll actually be paying off your unsecured debt sooner than you would have done if you'd gone on making the minimum repayments towards your original debts. You can also save a fair bit in interest this way.