If you are keeping track of several debts to several creditors, and would like the chance to simplify your finances and/or reduce your monthly expenditure, then debt consolidation may be suitable for you.
What is debt consolidation and how does it work?
Debt consolidation involves taking out a new loan and using it to repay all your existing unsecured debts in one go, leaving you with just one debt instead of several. This means that instead of making multiple payments to multiple creditors every month, you will now make just one monthly payment to one creditor.
Another feature of debt consolidation is that you may be able to lower your monthly outgoings by spreading your repayments out over a longer timeframe – repaying the debt more slowly. However, it is important to note that by doing this, you may pay more interest in the long run.
But this doesn’t necessarily have to be the case – if, for example, you choose to consolidate high-interest debts (from store/credit cards, for example), then you may pay less in interest overall. How? Well, even though you’re repaying the consolidation loan over a longer timeframe (and will therefore pay interest for longer), the actual interest rate may be considerably lower than the interest rates on your original debts – which means you may pay less in interest overall.
Who would debt consolidation be suitable for?
Debt consolidation may be suitable for people who:
1. Can consolidate all their unsecured debts (in most cases).
2. Can afford to repay the debt consolidation loan in full.
3. Don’t have erratic earnings – as someone whose income is unreliable probably won’t be able to commit to making the monthly repayments to their debt consolidation loan.
For more information on debt consolidation visit www.firstdebtconsolidation.co.uk
