Debt Consolidation | Consolidation Loans

What is Debt Consolidation?

Debt Consolidation is when you pay off all your debts with a loan that covers the full amount of the debt. This leaves you with only one payment per month towards your debt (repayment of the loan), making your debts more manageable and affordable.

The monthly repayment of the loan is generally lower than what you were paying towards your other debts. The interest is normally lower on the loan than it is on your other debts and the repayment is spread out over a fixed period of time, which is usually a longer repayment term.

There are two types of loan. Secured and unsecured.

Advantages of Debt Consolidation

All current repayments on credit cards and loans are converted into 1 monthly payment that is generally easier to manage and keep track of.
Interest rates can be usually lower, so you may have a more affordable payment.
Less pressure and harassment in dealing with multiple creditors.
In the long run you may save money and you will have a date when the loan will be paid off if you keep to your repayments.
Could help your credit rating as you will be less likely to default.

Disadvantages of Debt Consolidation

Don't be fooled into thinking you have cleared your debts. You have just shifted the debt to a different payment plan.
Be wary of interest rates. Try to get a fixed rate if you want a payment that doesn't change.
Fees may be payable to arrange the new loan.
If you have a poor credit rating you may have a higher rate of interest to pay which can mean it is less affordable. Another debt solution may be better for you.
If you get into difficulties making the new payments it can be harder to deal with only one creditor if you are then looking at a debt solution for example.

Is Debt Consolidation right for me?

Debt Consolidation could be suitable for you if:

You are struggling to keep up with the many different debt repayments at different times of the month.
You are paying high and varying levels of interest on many debts every month.
You are struggling to pay your debts and need a lower repayment.
You want to free up some disposable income every month for other things.

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