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debt consolidation

What is Debt Consolidation?

Debt Consolidation is when you pay off all your debts with a loan (either secured or unsecured). This leaves you with only one payment per month towards your debt (repayment of the loan), making your debts more manageable and sometimes more affordable.

You should seek independent advice about whether a loan would be in your best interests or not and you should shop around for the best deal you can find from lenders. If you are struggling with debt repayments, you could have a poor credit rating, so might not be able to get a loan on the best terms. Interest could be incredibly high, so it might not be your best option for addressing your debts. There may be other solutions better suited for your situation. You need to be sure that you can afford the loan repayments also, otherwise you might just be pushing unaffordable debts further down the line.

Read on to find out more about Debt Consolidation or fill in the form and one of our advisors will contact you to advise on your debts.

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Debt Consolidation

A Debt Consolidation Loan will only be beneficial for dealing with your debts if

  • it is used to pay some or all of your existing debts
  • the new loan repayments are lower than your current total debt repayments with a better rate of interest
  • you know you can afford the repayments (especially if it is a secured loan)

Debt Consolidation Questions and Answers

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.
  • You don't have a poor credit rating and can obtain a loan with reasonable terms that would be more beneficial than staying in your current situation with your debts.
  • One Monthly payment one one loan as opposed to multiple payments on multiple debts
  • 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 lower with 1 loan than with several debts.
  • You may have a more affordable monthly repayment.
  • Less pressure and harassment as only dealing with 1 creditor.
  • You will have a date when the loan will be paid off if you keep to your repayments.
  • 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. A different debt solution may be better for you in this case.
  • 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.
  • If your loan is secured against your home and you cannot keep up with repayments, then your home could be at risk of repossession.
  • Interest rates on loans can be subject to change over the loan period, unless you have opted for a fixed rate loan.
  • Consolidation loans generally last a longer length of time than your original debts.
  • If you don't close the accounts for the debt you cleared with the loan or if you don't clear all existing borrowing with the loan, then your debt problems are likely to become worse and repayments more difficult.

Need help with your debts?

If you need some help and advice on how to deal with unaffordable debts, click the button below and fill in our contact form. One of our advisors will then contact you to discuss your options.

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