Unsecured debt consolidation

Keeping up with multiple debts isn`t easy. Even people with enough money to service their debts can find it`s difficult remembering:

• When they need to pay, and
• How much they need to pay per month.

This is why many people choose to consolidate their unsecured debts. By replacing their debts with a single new loan:

• They can really simplify their monthly finances - they`ll have just one payment to make, once a month, rather than multiple payments on various days.
• They can make budgeting a lot simpler - with just one debt to service, they`ll know exactly how much money they need to set aside on a monthly basis.

Cutting costs with unsecured debt consolidation

Plus, there`s a third way in which debt consolidation can help people with their monthly debt payments - if they choose.

Someone who`s consolidating their unsecured debts can choose to repay their consolidation loan quickly or slowly, as they could with any other loan. Many people choose to repay it slowly, increasing the amount of time they`ll take to pay off that loan - and therefore the number of monthly payments they`ll make - but reducing the size of each monthly payment.

Doing this will reduce the cost of servicing their debt every month, but it`s important to consider the impact on the overall cost of the debt consolidation loan. After all, repaying a debt more slowly will mean it has more time to accrue interest.

In other words, this may increase the overall cost, but it does depend on the interest rate. If the new loan comes with a lower interest rate than the unsecured debts it was used to consolidate, it`s entirely possible to save money in the long run as well as on a monthly basis.

Are there any drawbacks to consolidating unsecured debts?

As with any loan, you`ll need to be sure you can afford your repayments to your consolidation loan. If you`re not sure you can commit to those payments, you might need to consider an alternative debt solution - a debt management plan, perhaps, or an IVA (Individual Voluntary Arrangement).

Plus, if you`re consolidating your unsecured debts, it`s important to remember that your old debts may be gone but the actual debt won`t - you`ll owe just as much as you did before you took out the new loan. It`s vital that you keep this in mind, and don`t start running up fresh debts - on the credit cards that you cleared with your debt consolidation loan, for example...

Related resources:

• Debt Consolidation
• Debt Consolidation Loans
• Debt
• Debt consolidation FAQs
• Pros and Cons of Debt Consolidation
• What types of debt can I consolidate?
• Types of loans
• Secured and unsecured loans: what’s the difference?

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