If you have multiple debts and would like to make them more manageable, a debt consolidation loan could help.
Debt consolidation loans have helped many people over the years - but like any debt solution, debt consolidation can have its downsides, so you should make sure you know all the facts before you make a final decision.
A debt consolidation loan can enable you to combine multiple debts into just one monthly payment. You will need to borrow enough to cover all the debts you intend on paying off (including any charges that may be associated with early repayment), after which you`ll repay your new lender in single monthly instalments.
It`s possible to reduce your monthly outgoings by repaying the loan over a longer period of time than you would have repaid your original debts. This can make a big difference to your finances, but keep in mind that you will also be paying interest for longer, and therefore could pay more overall.
Even so, you could save money overall if the interest rate on your debt consolidation loan is lower than the interest rates on your original debts. But the longer you take to repay the loan, the less chance there is that you`ll save money.
In general, debt consolidation is suitable for people who are able to manage their debts, but feel they would be better off making smaller monthly payments and/or simplifying their finances by combining several debts into one.
It can also be useful if you want a structured repayment plan for credit card and overdraft debts that need to be repaid.
If you`re really struggling with your debts, a debt consolidation loan is unlikely to be suitable, as it probably won`t make a big enough difference to your outgoings to help you get back in control of your finances.
If this is the case with you, you may want to consider an alternative debt solution, such as a debt management plan or an IVA (Individual Voluntary Arrangement).
And, as with any loan, if you don`t think you can afford the repayments - if your income isn`t stable enough, for example - then a debt consolidation loan certainly isn`t the right approach for you.
For more information on debt consolidation and a range of other debt solutions, click here or call 0800 195 2911.
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