Debt consolidation is a way of bringing all of your existing unsecured debts together. Often people believe bankruptcy is their only option when they are struggling with debt, this of course is not the case, consolidating your debts could be the answer to your debt problems.
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With this solution, you are arranging to pay back your debt over a longer period of time. By paying your debt back more slowly, each monthly payment you make will be lower than before. However it means you will owe money for longer, so will be paying interest for longer, so you could end up paying more in the long term.
Making debts simpler
Consolidating your debts does make things simpler, you will only have to make one monthly payment and will only deal with one company. Using an unsecured debt consolidation loan to combine your existing debts is designed to make them easier to manage. By only dealing with one company, debt consolidation will free you from the stress and worry of having to deal with difficult phone calls and letters from multiple creditors.
By repaying multiple debts, you may be paying over the odds in interest. As only one monthly payment is required with this solution, there is a reduced chance of you missing a payment, which could mean you end up paying higher interest rates or default charges which will affect your credit score.
Do you have multiple debts on store cards?
This could be the ideal solution if you are juggling multiple debts on credit cards, store cards, loans and Hire Purchase (HP) agreements.
This solution combines all of your monthly repayments into one simple monthly payment. A Financial Solutions Advisors will be employed on your behalf and will assess your financial circumstances. Your Financial Solutions Advisor will review your monthly income and essential expenditure including food, clothing, gas, electricity and water bills, and also costs involved with travelling to and from your place of work. Once your financial circumstances are clear, your provider can then approach your creditors to negotiate the best possible interest and repayment terms for you and also request they either freeze or reduce any late payment charges you have on your debts. Once this is done, they will then research the best value debt consolidation loan for your situation from one of a specialist panel of lenders.
Affordable monthly payments
Debt consolidation will consolidate your debts into one single, affordable monthly payment, so that you have less going out each month, however if your creditors do not agree to freeze interest or reduce charges, this will lead to an increase in the amount of time it takes to pay off your debts and the total amount that is repaid. With debt consolidation, your credit rating and ability to obtain credit will be affected in the short term and possibly in the medium to long term, though many people find because they have already missed payments or made late payments, there credit rating has already been affected. APR on a debt consolidation loan is 16.9% typical.
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