Do I have to consolidate all my household debts?

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If you are looking to consolidate your unpaid debts, you may have come across a debt consolidation loan. This allows you to consolidate all of your existing family debts into one larger, more affordable loan that gives you a single point of repayment, rather than multiple debtors.

The average UK household needs around £ 19,000 to run their home and get their bills under control – and debt consolidation is a popular product used by thousands of homeowners each year for this purpose.

But as with any financial product, there are risks, especially if you secure the loan against your home or if your personal circumstances change.

A debt consolidation loan is a good idea if:

  • It helps you reduce your overall payments

  • You can save money by avoiding arrears and late fees

  • It does not unnecessarily extend the term of your loan

A debt consolidation loan is not a good idea if:

  • The loan term is extended and you pay more overall, despite a lower interest rate

  • You have trouble repaying and your house is in danger of being repossessed

  • Your situation could change, such as your job or the economy

  • You still need ongoing credit in addition to the loan

What Does a Debt Consolidation Loan Cover?

A debt consolidation can cover everything from credit cards, loans, back taxes, overdrafts to overdue utility bills – and it’s a popular product for people with a lot to pay and to master.

In particular, if you are late on occasional repayments and this results in late fees, it might be worth changing that to a larger loan that consolidates them all and offers lower rates than you might be able to afford.

It is secure or not secure

“A debt consolidation loan comes in an unsecured form or it is secured against your home or property,” says David Beard, Founder of Price Comparison, Lending Expert.

“Interest rates can vary and they are measured using the APR. At the bottom of the scale, you could pay an APR of 3% or an APR of 99% depending on your credit history, use of security, and type of lender. ”

“As a product, it can be very effective,” says Beard. “Rather than paying multiple creditors and trying to keep up with them all, you could potentially get a lower rate and pay directly into one account and end up freeing yourself from your debt.”

“However, it’s not for everyone, because a lower rate isn’t really lower if the term of your loan spans multiple years – in which case interest can accumulate and you end up pay more. ”

“Plus, if you usually have trouble coping with repayments and a debt consolidation loan is secured against your family home, it could be at risk of repossession. ”

“As an alternative, you can always consider using a credit card balance transfer, which moves all of your credit card debt from one card to another, sometimes with much lower rates or introductory fees. for 12 to 29 months. ”

To see if a debt consolidation loan is right for you, you can use the Debt Consolidation Loan Eligibility Checker provided by Lending Expert or simply call 0161 820 8099.


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