A quick guide to debt consolidation
A quick guide to debt consolidation
If you want to lower your monthly expenditure and/or simplify your finances, then a debt consolidation loan could be an appropriate way for you to clear your debts at a rate you can comfortably afford.
What is a debt consolidation loan and how does one work?
• A debt consolidation loan is a loan designed to repay all your existing unsecured debts in one go, leaving you with just one debt.
• This means that instead of making multiple payments to multiple creditors each month, you would make just one payment to one creditor per month until all your debt - plus any interest - has been repaid.
• This isn't the only benefit of taking out a debt consolidation loan, rather than continuing to repay your debts individually. For example, you may be able to lower the monthly cost of paying off your debt, by arranging to spread your repayments out over a longer timeframe - repaying your debt more slowly. However, by doing this, you may pay more interest in the long run.
• On the other hand, if you are consolidating debts with high interest rates (credit or store cards, for example), then you may still be able to save money in interest. How? Even though you may arrange to repay the debt consolidation loan over a longer timeframe - and will therefore pay interest for a longer period of time - the actual interest rate could be considerably lower than the interest rates on your original unsecured debts.
Who are debt consolidation loans for?
• Debt consolidation loans are designed for people with several debts who want to make their debts simpler and/or less expensive (on a monthly basis) - who want to make sure their debt repayments don't take up too much of their disposable income, so they have money left aside for unexpected costs each month.
• A debt consolidation loan wouldn't be suitable for someone who has erratic earnings if this means they're not confident they'll be able to service their debt consolidation loan each month. It may also be unsuitable for someone who can't consolidate all their unsecured debts, or who doesn't think they'll be able to repay all the money they owe in a realistic amount of time.
If you would like more information about debt consolidation loans, a professional debt adviser will be able to answer your questions and help you decide if this is a good way for you to repay your debts. Also try www.firstdebtconsolidation.co.uk