Debt consolidation – what you need to know

If you have more than one unsecured debt, such as a credit card, personal loan or overdraft, you might be able to consolidate your debts into one.

Debt consolidation has many benefits. Often, the most appealing one is lowering the monthly payments by spreading the loan over a longer period. Many people feel this benefit outweighs potentially paying more interest overall (as the loan is picking up interest for longer).

Also, it’s generally easier to manage one loan than lots of different repayments every month.

If you’re looking for debt advice, a debt consolidation company can tell you whether consolidation could be right for you, or if another debt solution could help instead. You’ll plenty of information here: http://www.debtadvicenow.co.uk/debt-consolidation/.

The company gives the following debt advice for those considering debt consolidation:

 

• A loan application that is refused is still recorded by credit reference agencies – too many can make it even more difficult to borrow money.

• Don’t apply for a debt consolidation loan unless you know you can afford the repayments – if your income in unpredictable, if you’re expecting a drop in income, or if you feel the loan is too expensive, you really need to reassess your options.
• If you can’t afford a loan that would consolidate all of your unsecured debts, it may not be worth it.
• You may be turned down for a loan based on your credit rating if you have had problems with repaying credit in the past, so it may be worth checking your credit report before you apply for a loan.

 

Finally, while a debt consolidation loan can lower your monthly payments, it’s only really suitable if you’re comfortably affording your payments, but just looking to bring them down a bit. If you’re genuinely struggling to repay your unsecured debts, another debt solution that allows you to consolidate your debts into one monthly payment may be more suitable – such as a debt management plan or an IVA (Individual Voluntary Arrangement).