Debt consolidation lead

Why do we borrow? Cars, holidays, TVs, home improvements… the reasons might vary, but all loans mean we end up owing more. Or do they?

Debt consolidation loans stand out from the crowd. Unlike other loans, they’re designed to help people deal with the debt they already have. So they’re fundamentally different to other kinds of loan.

The principle is simple: borrowers consolidate their debts by taking out a new loan large enough to pay them all off. This can deliver three benefits in particular.

Benefits of consolidation

First of all, repaying one loan is simply easier than repaying many. Rather than juggling multiple debts – paying different creditors different amounts at different times – the borrower can just make one monthly payment. Since it’s easier to manage, the borrower is far less likely to make payments late (or not at all!), which can lead to anything from penalty charges to higher interest rates, and which always looks bad on a credit rating.

Second, there’s a good chance the new consolidation loan will come with a lower interest rate, especially if it’s used to pay off high-interest debts like credit / store cards and overdrafts.

Third, a consolidation loan gives the borrower a chance to think carefully about repayment terms. If they couldn’t keep up with repayments to their ‘old’ debts, it might make sense to pay back the consolidation loan over a longer period of time. It’ll mean they stay in debt for longer (and perhaps cost them more in the long run), but it’ll reduce their monthly payments, and sometimes that’s the most important thing.

Drawbacks of consolidation

However, there can be drawbacks to debt consolidation.

First, as mentioned above, paying a debt back more slowly means it’ll take longer gathering interest, so the total amount repaid can be higher.

Second, consolidation loans – unless handled carefully – come with a very real danger. When someone uses the loan to pay off their debts, they have to be very careful not to run up fresh debts (particularly tempting on credit / store cards and overdrafts, since they make it all too easy to borrow a few pounds here and a few there). So in general, debt consolidation is a solution that’s suitable for people who are confident in their ability to say ‘no’ to fresh credit. Anyone who isn’t confident could well be better off with a different debt solution.

Alternatives to consolidation

Either way, it’s always important to talk to a debt adviser who understands the full range of available solutions, such as debt management plans, IVAs (Individual Voluntary Arrangements), Trust Deeds (for residents of Scotland) or even bankruptcy. Each solution is unique, and its benefits and drawbacks can affect different people in very different ways – which is why it’s so important to talk to an expert first.

By: Melanie Taylor

Debt consolidation loans are loans that are used to pay off existing debts and in the process merge the debts into a single loan. Debt consolidation loans are therefore useful for people whose debts have spiraled out of control and who need to simplify their finances.

It has never been easier to obtain both secured and unsecured debt. These days there are thousands of lenders willing to issue various forms of debt – such as store cards, credit cards, and personal loans – to all kinds of borrowers.

Lenders seem willing to lend money to almost anybody in today’s economy and even people with adverse credit histories are not automatically excluded from applying for many different types of credit.

While this can seem positive, it can lead to situations where borrowers who are unable to manage their finances properly are successful in obtaining large amounts of debt. This is, of course, not a good situation for a borrower to find themselves in and it is becoming more common as lenders’ continue to loosen their lending criteria.

Individuals who overextend their borrowings can find themselves in situations where they have store cards, credit cards, car loans, personal loans etc from a variety of lenders. Each of the individual debts will require the borrower to make monthly payments towards the balance of the loans and the interest charged on them, which can cause havoc to their personal finances.

Not only can the overall amount of money due each month be too much for the borrower to pay, the sheer number of payments due can be difficult to manage and budget for especially if the payments are due at different times of the month.

This is where debt consolidation loans can help. If the borrower feels that their finances are out of control and they wish to only make one payment towards their loans each month, they should consider debt consolidation loans as an alternative to managing their debts on an individual basis.

There are several different forms of debt consolidation loans, including secured and unsecured, and the product that will suit each borrower’s requirements will depend on their individual circumstances.

Details of the borrower’s personal situation will need to be assessed and matched to the criteria for the various debt consolidation loans available on the market at the time of application. These details will include the borrower’s employment situation, whether they are a home owner or a renter, and whether or not they suffer from any bad credit.

If you wish to receive expert advice on debt consolidation loans, contact an independent mortgage advisor today.

By: Michael Sterios

What is Debt Consolidation?

Debt Consolidation is a means by where you can take all of your existing loans, credit card payments and outstanding bills and consolidate them into one loan. This loan is spread over a term that will enable you to comfortably afford to pay the set monthly amount. This way you know exactly how much you need to pay and have only one monthly payment going out of your account each month.

The hardest thing to deal with when you have many different outstanding debts is not being able to keep track of each debt as they all come out of your account at different times of the month and they are all for different amounts.

What is a Bad Credit Debt Consolidation Loan?

A Bad Credit Debt Consolidation Loan is much the same as a consolidation loan but the difference being that the origional debt was defaulted on in some way, thus putting the candidate in a higher risk bracket.

However this is not a problem as banks and institutions are willing to help you out with a bad credit debt consolidation loan and get you back on track with your finances.

Bad Credit Debt Consolidation Loan or Bankrupcy?

Making a decision on which option to take in order to be debt free should not be taken lightly. This should always be discussed with your bank, financial advisor or a debt counselor. To help you in your quest, there are a few points I would like to make.

Bankrupcy should only be taken as a LAST option. Yes, to go for bankrupcy would be the fastest and easiest option in the short term but you need to remember that it will be held on your record for at least seven to ten years. This will affect any credit or borrowing during that period and possibly afterwards too. So it is a short term fix but will be a long term problem.

A Bad Credit Debt Consolidation Loan is a good solution all round. It allows you to initially gain control of your debt and then manage it in a responsible manner. There is however still the issue of how you came to lose control of your finances in the first place and this needs to be addressed to avoid a repeat performance in the future. There are many companies offering aid for this service and many offer free advice, so it’s definitely worth getting advice from a qualified debt counselor. They will also be able to advise the best place for you to apply for a Bad Credit Debt Consolidation Loan.

By: Nelson Smith