Whether you are taking out a loan for home improvements, a holiday or a new car, often there will be an element of the loan used to consolidate existing debts. This is normal and our advisors can help by highlighting the pro’s and cons of consolidating each item of credit by considering the rates you are paying now, the time it will take you to repay as well as all of the other circumstance and requirements of your loan. Just fill in an online enquiry form and we’ll call you right back – or call us now on 01902 585020.
How can I approach debt consolidation?
There are different approaches to consolidating your debts. One way is to consolidate your existing loan or credit card debt into one lower affordable monthly payment. Essentially in this way you are taking out one loan to pay off all the individual debts, so that you have only one payment to make each month. This can be the right choice for you, as long as you remain aware that you are effectively replacing your debt, rather than removing it. This can then make it easier to keep track of your spending and because it is possible to get a debt consolidation loan at a lower rate of interest than your current debts, you can cut your monthly payments.
It is also possible to reduce your monthly payments by consolidating your debts into one loan which is spread over a longer period of time. It is important to be aware that this may not reduce the total amount that you are due to repay, but if you can reduce your monthly payments, it may still be the solution for you to lower your outgoings immediately. Once you have more disposable cash you can normally make extra payments to reduce the balance and the total interest you pay. Be mindful that using a secured loan for debt consolidation means that the debt is now secured on your home.
Does debt consolidation clear my debt?
No. Always remember, getting a debt consolidation loan means you have combined your debts, you haven’t in fact cleared them. However, debt consolidation can make the debt more manageable. Depending on the solution you choose, you may be able to reduce your monthly payments or the amount of interest you are paying.
When consolidating your debt, it may be possible for you to negotiate a lower settlement with your creditors, especially if you are in arrears, but this can never be guaranteed. This may allow you to reduce your outstanding repayments by agreeing on what you can afford to pay.
When should I consolidate my debts?
It is entirely your decision. First of all, it is important to understand your financial situation and then if you decide that the benefits of debt consolidation are what you are looking for, it could be the right option for you. If you would like to speak to one of our advisers, just fill in an online enquiry form and we’ll call you right back – or call us now on 01902 585020.
At Promise Money, our friendly team will help you find a financial solution to suit your individual needs.
Promise Money can help put you back in control but remember, extending the loan over a longer period can reduce your monthly outgoings but may increase the total cost of credit. Ask about options to make additional repayments to pay off the debt sooner and when you can afford it.