What are debt consolidation loans?

If you have several debts with different lenders, such as loans and/ or credit cards, a debt consolidation loan may help. This involves merging all of your debts into one. Although a larger debt, you are only repaying one lender with one repayment.

Including a personal assets as a debt, such as car or home, can will put them at risk.

How does this work?

This works by borrowing enough money to cover paying off, in full, all of your existing debts. This leaves you with one payment to one lender. Homeowner could obtain a secured loan if the debts are large.

What to consider (negative points/ risks)

Can you comfortably afford to sustain the repayment for the term of the loan? Could you cope if the interest rates rose?

Do you feel you need help with spending rather than a loan to cover many debts of whatever size?

If you are a homeowner, failed repayments on a secured loan lead to your home being repossessed.

If you take an unsecured loan, you need an almost spotless credit rating and may suffer from having to pay higher APRs.

Benefits

Using this wisely can give you a chance to cut on extra spending and get yourself back on track.

At risk of repeating the above, one repayment to one lender will save you money as opposed to a few loans/ cards all with their own APRs. One APR generally means repaying less in total.

You may even find a positive to your stress levels!

For further information visit our Blog – Understanding Debt Consolidation Loans

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