All you need to know about Debt Consolidation
A debt consolidation loan can be a useful way of reducing the strain on your finances in the short term, and providing you with the necessary time to improve your situation and get yourself in a position where you can afford making full repayments towards your debt. However, the new loan can also worsen your financial position in certain circumstances, and is not suitable to people with a poor income or a high cost of living.
The following page will answer some frequently asked questions by those who contact us, so you can get a clearer indication of whether using a debt consolidation loan is beneficial to you.
Can i consolidate all my types of debt?
Technically speaking, you can consolidate any type of debt, as debt consolidation simply involves taking out a larger loan to pay off numerous smaller debts. However, in some cases consolidating all or part of your debt will not be realistic. If you have a poor credit rating, or are currently struggling to make your payments on time for your existing debts, then your application for a debt consolidation loan will likely be rejected.
Will my Debt Consolidation loan be secured or unsecured?
Debt consolidation loan companies offer both secured and unsecured products. Typically, securing your loan against one of your valuable assets such as your property will lower the rate you are offered, though you will be putting your day-to-day stability and your ownership of your home in jeopardy if you fail to make your new payments on time. As such, it is advised that you do not take out a secured debt consolidation loan, because unless you are confident that your income can afford to make your new payments on time, you will be risking far more than you stand to obtain from the deal.
Will a Debt Consolidation loan reduce the size of my monthly payments?
Depending on which debt consolidation loan you take out, your credit history and the nature of your current circumstances, you might be able to lower your monthly repayments up to 75%. This will simplify the process of paying your debts each month, and could make them more financially manageable in the short-term. However, you should keep in mind that by reducing your payments in the short term, you will likely expand it in the long term due to the greater amount of interest you would have incurred.