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What is Debt Consolidation?
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Debts come in many forms, including bank overdrafts, credit cards, store cards and loans. When you have multiple debts it can be difficult to keep track of your spending and you may be paying high interest rates.
Once you find yourself in debt it may seem that you are in a downward spiral from which you cannot recover. If you are worried about your debts, try not to panic, but do not ignore the problem. If you have more than one outstanding debt or are falling behind with your bills, debt consolidation could be the answer.
What is debt consolidation?
Debt consolidation is getting a new loan to pay off all your existing debts. You can combine all your outstanding loans into a single larger loan with just one monthly repayment. You are therefore borrowing to pay off your debts. You will have a more manageable loan to pay off all your debts, but this is still money you owe.
Have you ever used one credit card to pay off another card? You cannot pay your bills this way without increasing your debt at an alarming rate. Too much debt can cause financial and emotional stress. Debt consolidation is not a magic answer, but it may help by reducing your payment amount and setting you on a timetable to get out of debt.
Almost all forms of debt can be consolidated. Including personal loans, credit cards, lines of credit, leased to own equipment or purchases, store cards, and other unsecured loans. A consolidation loan will reduce your overall monthly debt, save on interest fees, help to establish a monthly household budget and improve you credit rating by paying creditors in a timely fashion, and even stop creditors coming to your house. If used properly a consolidation loan can help you get debt free faster. However if there are more serious underlying problems, then it may only provide temporary relief before creditors return.
Consolidation comes in two forms:
- Secured loans - secured on your home and therefore only available to homeowners
- Unsecured loans - a personal loans available to all including tenants
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YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.
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