Could debt consolidation be suitable for me?

Debt consolidation could be an ideal approach to making your unsecured debts simpler to keep on top of every month.

A very common way of doing this is by taking out a debt consolidation loan.

 

What is a debt consolidation loan?

A debt consolidation loan is a new loan you could take out to pay off your existing unsecured debts. This effectively means your multiple debts would then be combined into one single debt, repaid to just one lender through a single payment every month.

Consolidating your debts with a loan could make repaying your unsecured debts much easier, and make it less likely you’ll make your monthly repayments late (or forget them altogether), which could see you incurring extra charges.

Follow this link to find out more about how debt consolidation works.

 

Would a debt consolidation loan be appropriate for me?

A debt consolidation loan is only really an appropriate solution if you’re managing your debts generally well, and are simply looking to simplify your finances. If this isn’t the case, and you’re really struggling with your debts, it’s important you get some professional advice on the best approach for you, which could be a debt management plan or IVA (Individual Voluntary Arrangement).

As with all loans, you must be able to afford your monthly repayments towards your loan – and must be able to commit to those payments until the loan is repaid in full.

 

What are the pros and cons of debt consolidation?

If you successfully make your repayments towards your debt consolidation loan every month, it could help you protect your credit rating – and won’t damage your credit record like some other debt solutions (such as a debt management plan).

Paying off all your existing debts with a consolidation loan could give you the opportunity to cut up your credit cards and cancel any overdrafts, helping you on the road to becoming debt-free.

However, on the downside, consolidating your debts with a loan could allow you to run up fresh debts on things like your credit cards – so if you don’t feel you have the self-discipline to resist this, it’s best to find another approach.

And if you arrange to repay your loan more slowly than your original debts, to reduce the size of each monthly payment, be aware that this can cost more in interest in the long run.