What is debt consolidation?
If you’re carrying several unsecured debts and would like the opportunity to reduce the amount you’re spending each month and/or make your finances that little bit easier to manage… a debt consolidation loan might be right for you.
We’re going to take a look at this now, but if you’d like to see more on this particular debt solution, you can see a definition of debt consolidation here.
Debt consolidation basically involves taking out a new loan and using it to repay all your unsecured debts in one go. Once you’ve done this, you’ll begin repaying your loan to your new creditor on a monthly basis – which means you’ll make just one payment to one creditor each month instead of several payments to several creditors.
This debt solution could also help you lower the amount you are required to spend each month. This is possible if you arrange to repay your debt consolidation loan over a longer period of time, meaning each monthly payment you make will be smaller.
Please note, however, that arranging to do this could result in you paying more in the long run… as your debt would have interest added to it for longer.
If you’re arranging to consolidate debts with high APRs (Annual Percentage Rates) – credit cards, for instance, or store cards – the interest on your debt consolidation loan may actually be a lot lower. This means you might be able to save some money in the long run, as well as on a month-by-month basis.
There’s no specific ‘checklist’ to determine whether a debt consolidation loan would be right for you… but if:
… then one could be the right option for you.