How to Consolidate Your Debts
If you’re struggling to pay off your debts, one thing is for sure, you are not alone. In the current financial uncertainty thousands upon thousands are in the same boat as you, some of them only just managing to meet the minimum payments – and even then with difficulty. And how soul destroying is it when you realize that you’re not actually reducing debt at all but just paying off the balance?
It is in these situations that debt consolidation offers a workable solution. Basically, when you consolidate your debts, you borrow enough to pay off all your debts and then pay off this single loan with just one monthly payment.
Debt consolidation is often a good solution for such people: in simple terms, a debt consolidation loan is used to clear all your debts and you pay this loan off with one manageable monthly repayment. The guide below will help you understand the different debt solutions available.
Unsecured Personal Loans are available without the need for security; i.e. you will not lose your house if you fail to make the repayments. However, to get one of these loans you will need a blemish-free credit record. Additionally, as a consequence of the credit crunch, the lending criteria have been tightened.
Terms varying from 1 to 7 years are available and interest rates are usually much more favourable than that charged on credit cards and store cards.
You can borrow what you need within a range of £1,000 to £25,000 and each payment you make will reduce your debt. The major thing to remember if you go for an unsecured loan is that you must be diligent with your payments and be sure not to allow your debts to mount up again. In fact, it’s good advice to cut up your store cards and credit cards.
Secured Personal Loans are secured on property, so you must be a homeowner to get one. The most important thing to remember is that if you don’t keep up-to-date with your payments you are at risk of losing your home – that is, your home could be repossessed if you don’t make the minimum payments.
A secured loan is not just an option for those with poor credit histories; they are also a good bet for the self employed, those who want to borrow a large amount, say £50,000 plus, and those who need a longer period for repayment.
Providing you adhere to the minimum payments set, both of these loan types can help you to rebuild your credit rating and save you thousands of pounds in interest payments.
If you are thinking of taking out a loan, it is important to do your research and and online comparison sites are a great help. All lenders will need evidence of regular income, which, in plain terms means you will need to be in regular employment.
A final word of advice: if you are in debt and have lost your job you must take action as quickly as you can to get debt consolidation help. The Citizens’ Advice Bureau is used to dealing with this situation and they are free – a hugely relevant point if you are struggling financially. Not only will you be offered advice, they will also help you to work out a debt management plan and negotiate a reduced payment plan with your creditors. Interest will be frozen and repayments will be based on your income, so the less you have coming in the less you will be asked to pay.
If you are really struggling to pay your debts, you should contact the National Debtline as quickly as you can.
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