Debt Consolidation Loans
No one likes to be in debt and sometimes a debt mountain can creep up on you. Before you realise it, you have smothered with interest charges, late payment fees and a spiralling debt problem.
There are several ways out of this. One of the most popular way to get out of debt is by using debt consolidation loans.
What Is A Debt Consolidation Loan?
It is basically one large loan that you take out to pay off your smaller, more expensive debt such as store cards and credit cards. The loan can be taken out over a longer period which will make the repayments smaller.
What Type Of Debt?
Generally applicants will try and consolidate the following types of debt
- Credit card debt
- Store card debt
- Car loans
- Student loans
- Unsecured personal loans
- And other unsecured debts
Also, many applicants that want a debt consolidation loan may already have a bad credit history, there is an article on site that deals with poor credit history and debt consolidation.
Debt Consolidation Advantages
There are several advantages and disadvantages of a debt consolidation loan.
- You will only deal with one creditor, stopping demanding phone calls asking for payments
- Because you can afford the repayments you could relieve some stress
- Lower your interest payments – a debt consolidation loan normally has a lower rate of interest than unsecured debt such as credit cards and store cards.
- No more late payment fees on small debts
- Only dealing with one loan is easier to manage and pay on time
Debt Consolidation Disadvantages
Just with everything in life, there is normally drawbacks to anything and there are several with a debt consolidation loan
- The debt may last longer – The debt would probably be spread out over a longer period
- The total debt repayment could potentially cost you more – because you will probably spread your payments over a longer period your interest charges will be a lower percentage but the total payment may be more
- For large amounts you may need to consider applying for a secured loan as unsecured loans only lend to £15,000 to £25,000 max. It also could be difficult to get an unsecured debt consolidation loan considering the current financial climate
There are other options for those in debt including debt management and individual voluntary arrangements (IVAs) – you should consider your options and these offers carefully before making any decision.