Debt Consolidation Loans

Debt consolidation is when several smaller debts are combined into one large debt, and the several repayments you make are amalgamated into one manageable monthly payment. If you feel you have explored all your available options to manage your debt, but still need assistance, you may wish to consider taking out a debt consolidation loan. This loan should be used only as a last resort however; if possible, speak to a financial advisor to ensure that taking out a debt consolidation loan is the best course of action given your circumstances, and check whether or not the loan offers good value in terms of interest rates and repayment periods, compared to the market average.

Debt consolidation loans can enable you to reduce your monthly repayments, help you avoid missing payments, and as a result reduce any existing damage to your credit score. If you are unsure as to whether or not a debt consolidation loan would be beneficial for you, speak to someone from the Citizens Advice Bureau who can advise you on these loans, and alternative ways to manage your existing debt. If you are a homeowner, you may wish to consider debt consolidation by remortgaging your property (see Debt Consolidation By Remortgaging).

A major disadvantage of debt consolidation loans is that all your debt is owed to just one lender: this puts this one lender in a powerful position should you need to negotiate agreement terms, for example if you are struggling to make repayments. At least if your debts are spread among a number of different creditors there is a greater chance that one of them may agree to a more flexible payment schedule.

If you are sure that a consolidation loan is the best option for you, but you are concerned about keeping on top of debt reduction, it may prove sensible for you to set up a direct debit to automatically make repayments. This avoids the chance of missing a payment and facing charges, merely because you forgot to pay on time.