Debt Consolidation - Make your finances more manageable by consolidating your debts into one monthly repayment
Are you finding it a struggle coping with all the debts you've managed to build up? Are you making regular monthly repayments which you really can't afford? Is the interest you are paying on your loans swallowing up a huge portion of your repayments?
If you've answered yes to any of these questions then maybe it's time you considered debt consolidation.
Debt consolidation is very often the only answer for people with multiple debts and it makes a lot of sense if done properly. It can allow you the freedom to just make one monthly repayment to one company at a lower rate of interest and possibly spread over a more manageable period of time.
However, to get the most from debt consolidation you need to consider which option and which loan consolidation suits your need best.
Make an appointment to see an independent financial advisor
An independent financial advisor can take a look at your finances and, taking account of your income and outgoings, help you work out an affordable solution. They will be able to suggest which is the best way for you to reduce your debts and help organise it for you too.
Amongst the suggestions they may suggest are taking advantage of a short term zero percent interest rate balance transfer credit card - although be aware there is usually a 3% charge based on the amount you wish to transfer.
Alternatively, a remortgage may be the answer whereby you can borrow money based on the value of your home and spread your repayments over the term of the loan.
Or, you may take out a medium term loan which is separate from your mortgage and repay the money back over a number of years at a lower interest rate than you are currently paying.
Be careful with any personal loan you take out. It is always preferable to take out an unsecured personal loan rather than securing it on your property.
Choose the debts you want to consolidate
It may surprise you to learn this, but you may not necessarily want to consolidate all your loans. For example, if one of the debts you are repaying is on a low interest rate then you may be better off keeping it separate form the rest.
However, if you have several debts on store cards or credit cards which are charging a lot of interest then it makes sense to consolidate these. You'll be paying the consolidation loan off at a lower APR and you could save a lot of money in the long term.
Don't take on more than you can afford!
Work out a realistic amount of money that you can afford to put aside each month to repay towards any of your loans. Use this figure to see if you can afford the repayments before taking out your consolidation loan. You may have to increase the repayment term in order to afford the repayments so you should consider the cost of this in the long run. Obviously, the more quickly you repay your loan, the less interest you will repay.
Top Debt Consolidation Tip!
Try to get a consolidation loan which charges the interest on a daily basis rather than all upfront. This will allow you the opportunity to repay your loan early without having paid more interest than you should have. Also check that you will not have overly expensive early redemption fees for clearing your loan or any existing debts early.
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