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Debt consolidation loans

A debt consolidation loan can seem like an ideal solution if you re struggling with all the organisation and administration required to manage multiple debt repayments.

People with multiple creditors (such as credit cards) may consider debt consolidation as a way of paying off the balances of their debts and instead make the one repayment on the debt consolidation loan. But there are some serious implications with regard to debt consolidation that you need to know in order to avoid falling even further into debt.

To debt consolidate or not to debt consolidate?

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Debt consolidation after credit

In recent years, with the increased availability of credit, many people struggling with several monthly debt payments have attempted to use a debt consolidation loan to put all their debts into one supposedly affordable payment, either by securing their debt on property or through an unsecured loan.

Some people find that the debt consolidation loan interest rate is lower than the interest rates they re paying on their other debt (credit cards and payday loans being typically expensive forms of credit). So a debt consolidation loan that means one monthly payment that is simpler and cheaper than trying to manage several other more expensive loan repayments can seem a tempting course of action.

Debt consolidation the pros

In some circumstances, it may seem sensible to debt consolidate.  If you can identify that you re in debt difficulties before you ve actually missed any payments, then your credit rating won t be affected, assuming that Default Notices   haven t been issued already on the debts you owe.

If you choose a good debt consolidation loan with a cheaper interest rate than your other debts, then that should mean you ll then have a lower monthly payment to one creditor.  Your income and expenditure should help you decide what you can and cannot afford if in doubt, contact a Payplan debt adviser ,  or for more information on how debt consolidation could work for you, take a look at this interesting and informative guide to debt consolidation .

Debt consolidation the cons

Some people who take out a debt consolidation loan subsequently take out more credit or use their credit cards again. This compounds their debt problem even more, of course, and leaves them even worse off than they were before. If you take out a debt consolidation loan, you need to be totally sure that you won t need to use your credit cards or take out any other credit while you re repaying your debt consolidation loan.

Debt consolidation may be harder for people with poor credit ratings, and the high rates of interest that people falling into this category are offered may not even cure the symptoms of unaffordable monthly debt repayments. Secured loan interest rates are generally lower than unsecured loan interest rates, but to benefit from these you normally need to be a homeowner.

Debt Consolidation Loans What Can You Do Next?

As a next step, contact Payplan for free, sympathetic and immediate advice regarding the dangers of debt consolidation loans. Telephone free on  0207 760 8977   or use our debt help form ; your free debt advice begins as soon as you contact us.

Unlike so many other debt management companies, here at Payplan we don t charge any upfront fees for debt solutions such as Individual Voluntary Arrangements and Debt Management Plans; instead we receive our income primarily from the credit industry. That is, your creditors recognise that our debt solutions are a sustainable and realistic strategy in getting you debt-free, and agree to arrangements that will typically complete with no fees charged to you.

Payplan provides expert, impartial confidential advice debt solutions to our clients.


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