How much does debt consolidation cost?

Debt consolidation can be a good way for people in debt to reduce their outgoings and simplify their finances.

However, you should consider the costs involved. There may be administrative fees involved, and there may be other charges associated with the debts you`re paying off that you should consider before you go ahead.

How debt consolidation works

A debt consolidation loan is a loan big enough to pay off several existing debts - in effect, you`ll be `consolidating` these debts into just one loan. This means you`ll start making just one monthly payment, instead of many.

It`s possible to reduce your monthly outgoings by repaying the debt consolidation loan over a longer period, making each repayment smaller. This can make a big difference to your ability to manage your debts, and can free up cash to put towards other things.

However, be aware that repaying your loan over a longer period of time will also mean paying interest for longer - which could mean you`ll pay more overall.

That said, you could save money overall if your debt consolidation loan interest rate is lower than the interest rates on your original debts.

Even if you do pay more in the long run, though, you will still feel the benefit of reduced monthly outgoings.

Will my debt consolidation loan cost me anything?

There may be costs associated with taking out a debt consolidation loan. It`s still quite possible that you will save money on a month-to-month basis, but you should still consider these costs before you go ahead.

The interest rate you are offered on your debt consolidation loan will vary depending on your credit history, meaning your monthly payments could be more expensive if your credit history is poor.

You may also pay an arrangement fee if a debt consolidation company helps you find the loan. And you should consider whether there are any fees or charges associated with paying off your other debts in one go.

If any of your existing repayment agreements contain an early redemption penalty, you will have to account for this in your debt consolidation loan, unless you can afford to pay the charges up front.

For more information on debt consolidation loans, click here or call 0800 195 2910.

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