Debt consolidating finance uk
Most people do this to reduce the interest rate on their debt, to bring down their monthly payment amount or to reduce the number of companies they owe money to.
Debt consolidation involves taking out new credit to pay off your debts and debt management is where you negotiate affordable payments with the companies you currently owe money to.Both can lead to lowering payments but are completely different ways of dealing with debt.If you're not sure which option suits your circumstances then we can help.Some consolidation loans will require you to secure the debt against your home.We'd strongly recommend that you don't use these types of loans to consolidate unsecured debts.If you fall behind with a secured consolidation loan in the future you will be at risk of house repossession.
The logic behind debt consolidation loans may seem sound and this type of borrowing can make great practical sense, but you need to beware of the pitfalls that could make it go very wrong. Small loans, payday loans, overdrafts, store and credit card deficits can all charge extraordinarily high rates of interest, while the very best rates are usually only available on bigger loans.
This means that combining all your debt into one consolidation loan could reduce the overall rate you pay, and possibly reduce the overall amount even if you pay over an extended term.
Debt consolidation loans aren't right for everyone.
It's important to check all of the other options available and make sure you're making the right choice.
While consolidating debt often sounds like a promising solution, this could make your situation worse.
Consolidating debt usually involves taking out new credit to pay off existing credit.