Debt consolidation
If you are currently in a tricky situation with your finances and juggling payments to more than one lender, you are not alone. Britain as a nation, owes over £1 trillion. But rather than trying to pay off the minimum amount for each debt, a debt consolidation loan could reduce your debt to one manageable monthly payment. However, you need to look at all of the relevant issues as a debt consolidation loan may not be right or available for you.
What is a consolidation loan?
In its simplest terms, a debt consolidation loan will pay off your existing debts and transfer the monies owed into one loan with one manageable, monthly repayment. You will still have to pay back all the monies owed, but with a debt consolidation loan you may be able to reduce your monthly outgoings, pay a lower rate of interest, or be able to spread the costs out over a longer time period.
How can a debt consolidation loan help with debts?
If you are careful about managing your spending, a debt consolidation loan can help by:
Reducing your monthly payments
By spreading out the term of the debt you will often be able to reduce your monthly repayments to a manageable level. Most people are often paying the ‘minimum payment’ allowed on the existing debts. This often just means covering the interest component of the loan while leaving the actual total amount owed unchanged.
Improve your credit rating
If you are able to pay off the loan and accrue no further debt, this will be seen as a positive impact on your
Reduce the interest you pay
If your debts are with store or credit cards that have a high interest rate, then you will generally pay back less interest on your debt with a loan. Make sure you stop spending on your cards though.
