Debt consolidation loans – the facts

A debt consolidation loan needs to be large enough to cover all the debts you want to consolidate, leaving you with one simple monthly repayment. However, not every debt is really suitable for inclusion in a debt consolidation loan. Here’s a few to consider:

• Mortgage
  • Your mortgage is secured against your property – and mortgages are generally too big to be included in a consolidation loan anyway. You might be able to take out a debt consolidation mortgage (instead of a debt consolidation loan) to repay your unsecured debts – but you could have higher mortgage payments every month and you could be at risk of losing your home if you didn’t keep up with repayments.
• Student loan
  • A student loan a debt to the Student Loans Company. You should only have to repay this once you earn over £15,000 per annum. If you cannot make your student loan repayments, you probably need to look at reducing spending elsewhere.
• Low-interest overdraft
  • It may not be appropriate to include a low- or zero-interest overdraft in a debt consolidation loan, as you may end up paying more in interest. It might make more sense to continue repaying your overdraft separately.

If you have unsecured debts that you’re thinking of consolidating, you could contact this company to apply for a debt consolidation loan.

Five things you should know

A debt consolidation loan can simplify your finances – as you will only have one creditor to deal with, instead of many.

A debt consolidation loan can reduce your monthly payments – if you spread the loan over a longer repayment period. Just remember that paying interest for longer will mean paying more interest in total, so it could cost you more in the long run if you do this.

A debt consolidation loan isn’t really suitable for anyone struggling to keep on top of their debts because they can’t afford them. Taking out a further loan may just be ‘masking’ debt issues. A debt management plan may be a suitable alternative.

If your income varies from month to month, or season to season, you should seriously consider whether you’ll be able to make regular monthly repayments before taking on any kind of credit.

When you apply for any kind of loan, you will be credit checked. Consider your credit history – how have you handled lending in the past? Are you likely to be approved for a loan with what you’d consider a decent interest rate?

Having said all that, a debt consolidation loan can be a really helpful way to make managing your debts simpler. If you would like to apply for a loan like this, simply follow the link in this article.