What is a debt consolidation loan?

Dealing with several debts isn't always as simple as we'd like it to be. If you have several credit cards you're repaying per month, keeping on top of multiple payments is a big priority, as missing payments could damage your credit rating and lead to financial problems.

If you're looking to simplify the way you manage your debts, taking out a debt consolidation loan could be the answer. Not only could it mean you have just one debt to repay every month, but it could also help you to reduce your outgoings - which could make a real difference to your monthly finances.

Let's look at exactly how a debt consolidation loan could help you.

How does debt consolidation work?

Consolidating your debts basically means bringing several debts together - effectively turning multiple debts into a single one.

Consolidating your debts with a loan means you'll only have one monthly repayment to make, to just one lender - which should take some pressure off your situation and make keeping on top of all your other essential outgoings (such as your rent/mortgage payments, Council Tax, petrol costs, etc.) that bit easier.

But how could debt consolidation help you to reduce your outgoings?

Debt consolidation & reducing your outgoings

Rising living costs, falling disposable incomes, squeezed savings: many people's budgets have been feeling the pinch in recent times. This being the case, some people repaying debts may want to reduce their monthly outgoings, so they can have a bit more leeway in their budget from month to month.

Basically, you could agree to repay the consolidation loan over a longer period, so the monthly payments you'll make will be smaller. However, it's important to bear in mind that repaying the loan over a longer period will mean you end up paying more overall, due to the interest that will build up.

Is debt consolidation suitable for me?

Taking out a debt consolidation loan could be an option if you're repaying your debts quite easily every month. If you're really concerned about affording your debts, it's important to speak to a debt adviser as soon as possible to find the best way of bringing your finances under control.

Just like any type of loan, a debt consolidation loan requires commitment, as you'd need to be confident that you could keep up with your monthly repayments until you've repaid the loan in full.

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Tags: debt, credit cards, credit rating, debt consolidation, debt consolidation loan

Fees payable when continuing service is provided. Repaying debt over a longer period may increase the total amount to be repaid. Calls are recorded and are usually free from UK landlines. Mobile phone users may be charged and should check with their service provider. Cards are provided by third parties and are subject to eligibility, status and terms and conditions. Applicants must be UK residents aged 18 or over.