If you’re new to the world of debt, you need to find out more about how to handle it; debt consolidation is not something you should enter lightly. To find out more visit http://www.bloggingawaydebt.com/
Debt consolidation is basically a way of re-organising your debts into one affordable monthly payment. Debt consolidation loans are often taken out using your home as collateral; you should always think carefully before securing other debts against your home. As with any other secured loan, your home may be repossessed if you do not keep up with repayments. But debt consolidation can help those people who need to reduce their monthly outgoings.
What are the pros?
The pros of a debt consolidation loan include low interest rates, a low affordable monthly payment, the end of chasing letters or threats of legal action and the fact your credit rating is not impaired.
…And the cons?
Interest costs over the period of the loan will still be significant. You will also have to stick to a debt management plan and keep within a budget to ensure you stop overspending on credit cards etc.
Who should consolidate?
Debt consolidation loans should only be taken out if you know you can meet the repayments. They are suitable for anybody who feels their debts are becoming too complicated to handle. It’s easy to let credit cards, store cards and loans dominate your outgoings. Debt consolidation loans are suitable for those who want to reduce their monthly payments. It’s also suitable for those who don’t feel organised with their finances, and are not confident they’ll be able to stay afloat if they don’t take action.
Why choose debt consolidation?
Debt consolidation is more expensive in the long term, but can be highly effective in the short term. It works by spreading your new debt consolidation loan over a longer period. You could save over 50% on your current monthly repayments, although your new loan’s overall interest payments will increase over the long term.
How much should I borrow?
You should only borrow the minimum – the more you borrow, the more it will cost in the long term. A big loan over a long period will charge a significant amount of interest. But in return for this long term loan, you will receive a significant lower interest rate, for example 8.9%, which is usually half that of a credit card, e.g. 17.9%.
Is debt consolidation suitable?
An unsecured loan is suitable if you don’t have a home to secure your debt to, but do have multiple high interest debts which are creating cripplingly high monthly repayments.
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