Debt Consolidation

Debt Consolidation

Given the adverse economic climate in the country, there are many people who are finding themselves in serious debt. If you are one of them, realise that there are various options to deal with bad debt such as IVA (Individual Voluntary Arrangements), Debt Management Plans, Debt Consolidation and Bankruptcy.

If your debts are spread across a variety of sources such as credit cards, unsecured loans, unpaid bills and other agreements, a debt consolidation loan can help reduce your repayments and make your overall debts more manageable. A debt consolidation loan is when you take all your outstanding debts and consolidate them into one loan which has a lower interest rate and a higher repayment period.

Basically, debt consolidation is a process that allows you to transfer a number of unsecured credit cards or loans into another credit product such as a loan or credit facility.

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When is Debt Consolidation advisable?

Debt consolidation is often advisable when you have multiple unsecured debts, for example, credit card debt. Credit cards can carry a much larger interest rate than even an unsecured loan from a bank.

As a debtor, you can avail a secured loan that is a loan secured by collateral, at a lower rate of interest. By this you can reduce the total interest and total cash flow paid toward the debt.

Some advantages of Debt Consolidation

Debt consolidation loans have lower rates of interestMost debt consolidation loans are secured loans so invite a lower rate of interest. The credit card interest rate, on the other hand, can be really paralysing. By debt consolidation loan, you can save hundred of pounds of extra arrears every month. By employing a lower rate of interest in your repayment strategy, you can dramatically reduce the total amount that you have to pay monthly.

Simplify loan repayments

Instead of dealing with multiple lenders, you just need to deal with one. Debt consolidation therefore means a reduction in wasted time for finance management as also a better understanding of financial strategies. Besides, it can almost completely automate the repayment process.

Debt consolidation improves credit ratings

With debt consolidation, you can regain your credit rating, because it is much easier to pay one single debt consolidation loan monthly with a small interest than several debts.

Creditor chasing would stop

Generally, the debt consolidation company would deal with your creditors on your behalf which means creditor chasing would stop.

Some disadvantages of debt consolidation

A longer repayment term
If you have a poor credit history it may be difficult to get accepted for a loan.

Risk of getting further into debt if you continue to spend on the cards that you consolidated.

Various debt consolidation options

There are various debt consolidation options available in the UK. You can seek specialist debt advice to see which option is best suited for your financial situation.

These are the various debt management and consolidation options that you can consider:

• Debt Management Plans
• IVA
• Debt Solutions
• Debt Help
• Consolidation Loans
• Trust Deeds

If you are unsure about your options, you can seek specialist debt help from our advisors. Our counsellors will explain the debt solutions available to you based on your personal situation.

Call us now on 0800 954 6241.

Further reading
Debt | Debt Solutions | Debt Consolidation | Refused Consolidation | Debt Consolidation Loans FAQs