Debt Consolidation Loans
Money Guru understands that being in debt can be highly stressful. Having many debts can be very difficult to juggle. Consolidating these debts into one monthly payment can be a simpler way to manage your outgoings.
There are many providers of Debt Consolidation Loans, but, they are not always that easy to understand or to obtain.
Paying off all outstanding debts can relieve a lot of stress. This is the case especially when someone is behind or being chased for payments.
Owing money to one company is easier to manage compared to owing to multiple creditors.
Could decrease the amount you owe due to not paying charges for late payment on other debts.
Your may be in debt for longer than if you just worked to pay off the original creditors.
Due to this longer repayment term you may end up paying more in interest. (depends on loan terms)
If you miss a payment you will be charged.
Many Personal Loan companies will offer you the option to take out a personal loan in the form of a Debt Consolidation Loan.
As with many Loans a Debt Consolidation Loans’ interest rate will depend on your credit score. It is likely if you need a Debt Consolidation Loan then your credit score will be fairly poor. This means you will pay a higher interest rate. If you are in this position it may be worth checking your credit score.
Using a Debt Consolidation Loan is one way of protecting your credit rating from further damage. Bankruptcy and IVAs will seriously affect your credit rating. They are to be avoided as much as possible in this regard.
Debt Consolidation Vs Debt Management
Debt Management is a process by which you talk to your Creditors to arrange a repayment plan. This could result in reduced payments to help make sure you don’t miss a payment. This will not result in one monthly payment which is what happens when you take out a debt consolidation loan. This can often be a good option if your creditors are happy for you to restructure your repayment plan.
Why not take a look at our loan calculator to see whether you could reduce your payments when taking out a Debt Consolidation Loan.
Secured Consolidation loans
Some companies will ask you to secure the loan against your property; this may be a car or your house. Securing your debt against your property is often seen as good way to get a loan, but if you get in to trouble and miss payments your property may be repossessed by the lender to cover the cost of the loan.
Loans may be secured on your home. Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up the repayments on a mortgage or any other debts secured on it.
If you are thinking of consolidating existing borrowing you should be aware that you may be extending the terms of the debt and increasing the total amount you repay
At Money Guru we would always advise you to seek the right advice before taking out any form of credit. Taking out more credit to cover current debts is not always an advised course of action and exploring all options is sensible. Please take a look at the following sites if you require debt advice:
A free debt advice service
The government website offering more free advice on dealing with Debt.
Updated on 3rd June 2016