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Guide to consolidating your debt
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Debt Consolidation Loans
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A Debt Consolidation loan will pay off your existing debts, and transfer the monies owed into one loan with a manageable, monthly repayment.
In theory.
The Comfort Zone
You must be prepared to tighten your belt and budget accordingly or a debt consolidation loan will not work. On the other hand, should you live within your means and spend wisely while repaying a debt consolidation loan, then you could be looking towards a bright, debt free future.
Don’t be lulled into a ‘comfort zone’ once the loan hits your account. Having a few thousand pounds sitting dormant can be a very tempting prospect, but it’s there to pay off debts, not for new spending.
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So the key word here is ‘discipline’?
Without a doubt. Debt consolidation loans, especially if they’re taken out to cover excessive spending on store cards, will only work if you curb your spending while paying these loans back. Those with a history of overspending should perhaps think twice before applying for this type of loan. An adverse credit loan may be more appropriate in these cases.
A number of lenders will only issue this type of loan if you agree to include your property as collateral against the loan. You need to be certain you will be able to cope with the loan repayment, as your house could be at risk if you default. This should act as enough of a health warning to not enter into a loan agreement without considerable forethought.
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Understood. Didn’t you mention a debt free future?
Yes, provided that you stick to the rules. It’ll take a prolonged amount of time with a debt consolidation loan though, so don’t expect to get rid of your debts overnight.
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. These loans will also enable you to improve your credit rating, provided that you consistently keep up with repayments. Not only could you emerge from this loan debt free, but it could also boost your chances of being accepted for credit in the future.
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There are so many loan providers out there. Can you help me navigate this loans maze?
Sure. CreditChoices has partnered with Beat That Quote who will search a range of options for you, and try to negotiate a better APR.
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