If you’re feeling overwhelmed by debts and are in debt to multiple creditors, you may want to consider debt consolidation. Debt consolidation involves taking out a single, new line of credit in order to pay off existing credit. While this does mean that you are still in debt, it can streamline and simplify your many debts into one single debt, which for some people makes keeping on top of the debt a much more manageable task.
What are the benefits of debt consolidation?
There are many benefits to consolidating your debts. The biggest benefit is probably psychological; many debtors feel that, with so many debts to pay off at the same time, they never feel that they are making progress. With just one debt to pay, every penny will make a visible difference. Consolidated debts can also often be arranged with lower interest payments and lower monthly payments, too, which can be a lifesaver if you’re currently struggling to pay off your debts at a higher rate.
Secured vs unsecured consolidation loans
Consolidation loans come in two types: secured and insecured. Secured consolidation loans are secured against an asset, such as your home. You may only be offered a secured loan if you have a poor credit history, and if you miss repayments on this debt you could end up losing your home. You should consult a debt advice company such as National Debt Help before taking out a secured consolidation loan, as the risks of these loans are significant and should not be taken too lightly.
Is debt consolidation for me?
Debt consolidation shouldn’t necessarily be the first debt management route you consider. It does require taking out a new loan to cover existing loans, and cheap repayments often means staying in debt for longer. However, if you are having trouble paying off multiple debts and have already looked for other options with lower interest rates or repayments, then debt consolidation may be a sensible option. Before arranging to consolidate your loans, it’s important to first ensure that you can make the repayments on your consolidation loan without trouble.
For expert advice and assistance in debt consolidation and other forms of debt management, please contact National Debt Help on 0800 002 9051. You can also use our debt calculator to figure out what kind of help you could be qualified to receive in paying off your debts.
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