fbpx

How Does Debt Consolidation Works?

Debt consolidation works by taking out a new loan or credit to pay off your existing debts. This may have extra fees and you must seek debt advice before you consider taking the risks.

Most people consider debt consolidation to minimize their interest rate, and monthly payments or installments. Besides, it’s often considered for those individuals who’s been paying debts to several creditors.

In terms of credit card debt, debt consolidation can be done through balance transfers to an institution offering lower interest payments.

Before you decide to consider debt consolidation, you must call us to find out whether it’s the perfect solution for your debt problems. If debt consolidation does not fit your circumstances, it might make the situation even worse.

Debt Consolidation and Debt Management Plan

Debt Consolidation differs from a debt management plan. You must not mislead yourself and get confused between the two debt relief solutions.

A debt management plan involves the help of your DMP provider to negotiate affordable installments with your creditors.

In contrast, debt consolidation is the process of taking our new loan or credit to pay off your existing debts. Once you contact us for free debt advice, we ill determine whether a debt consolidation suits you best. If not, we can provide you with several options on how you can manage your debts better.

Should I Consolidate Debts?

Each situation is unique from the other. This means you can’t tell if debt consolidation would be best for you unless you weigh your options and look at your situation closely. It is always best that you contact us for free debt advice.

A debt consolidation loan might work for you but not for your friend or other individuals. Once you decide to take out a loan from one company to consolidate your debt, you’ll only be paying one payment for your several debts each month.

The outcome might not be what you expect, depending on your circumstances. The catch is you might be making huge payments to a debt consolidation company over a long period, making you pay more than what you expect. This means you have to check if you can afford the loan.

Besides, if you are struggling to repay your debts, the more that you might not cope with paying for a debt consolidation loan. The best thing to is to call us straight away. We can help you scrutinize your income and expenses to determine if a debt consolidation works for you.

Unsecured Debts and Consolidation Loan?

Unsecured debts are debts that are not linked to your assets such as your home. Some debt consolidation loans may require securing the debts against your home. This means you will be at risk of losing your asset when you failed to make payments on your consolidation loan. It can lead to home repossession when this happens.

Will Debt Consolidation Affect My Credit Score?

If you keep your payments up to date, debt consolidation will not impact your credit severely. However, when the amount of the new credit or loan is unaffordable for you, it can lead to ruining your credit history. This happens when you missed payments due to the changes in your financial circumstances.

Can I Qualify for Debt Consolidation If I have A Poor Credit?

If your credit history shows records of missed payments, CCJs defaults, or insolvency measures like bankruptcy and IVA, your debt consolidation interest might be higher than normal. If this is the scenario, then a debt consolidation loan won’t solve your debt problems. You may read our guide on how debt impacts your credit record.

Is it Worth Consolidating My Debts?

Some debt consolidation companies offer solutions that sound appealing to your ears. So it’s important that you seek debt advice to organizations that will evaluate your financial situation before giving the option that suits you perfectly. Should you need advice on how to get rid of your debt, call us or use our free online debt advice tool.

Things to Consider When Getting Debt Consolidation

Before you consider taking out a debt consolidation loan, make sure you pay off your bills on time. Also, you have to cancel credit card agreements to avoid obtaining further debts. Lastly, make sure to talk to debt experts from an organization like us so you can understand how you can clear your debts.