Consolidation means to merge into one and debt consolidation is a way of merging all of your debts into one payment.

 

 

Loan companies usually sell debt consolidation loans as a way of consolidating your bills into one, lower, easy to manage, easy to afford payment. By consolidating your debts into one loan you may be able to obtain a much lower monthly payment, this could make life more affordable or free up money for another purchase. Sometimes this lower monthly payment is achieved by consolidating debts with higher interest rates, such as credit cards coming out of their discount period, into one loan with a more competitive APR. Unlike credit cards, loans are usually taken out over a fixed term so you know exactly when you will be clear of the debt. If your circumstances change and you want to ever pay the loan back early then you are protected by the Consumer Credit Act regulations that govern how much interest the lender can charge you. The current rules state that you can only be charged one month’s interest plus one months notice period.     

 

 

 

A lower payment is often only achievable by spreading the payments over a longer term than your existing credit. This means that it will take you longer to get debt free and in the long run you may have paid more. Your existing lenders may have fees for settling any existing accounts early and they need to be taken into consideration when calculating how much that you need to borrow. Your new lender or broker may also charge an administration fee that is added to the new loan and increase the total amount that you borrow. Make sure that you are comfortable with the monthly payments for the duration of the term as If you are unable to keep up with the payments then you may end up back at square one. 

 

 

Before considering consolidating your debts with a loan work out what your monthly budget is. Think about how long you are planning on taking the loan over and take into consideration any changes in circumstances likely to happen during that period. Take into account the interest rate on your existing credit and compare this with the likely rate that you will be charged in today’s marketplace. Moneyextra.com allows you to search the whole of the market for the best deal for you and apply on-line for debt consolidation loans.    

 

 

Debt consolidation loans are not the only means of reducing your monthly outgoings. In these credit crunch times, more and more people are being refused credit. Restricted lending means that the banks can be more picky about who they lend to and at what rate. Lenders are not obliged to disclose the reasons for declining any application for credit and rarely do so. If you are curious to discover why you have been turned down for credit, then the first place to check is your credit report. A number of companies offer services to provide you with a copy of your credit file. You can obtain a copy of your credit report for free, by signing up for Credit Expert’s free trial. This allows you to confirm that all of the information stored on record is up to date and accurate. If the information isn’t accurate then you may be able to get this amended and improve your credit score. Alternatively you may want to explore the consolidation options in the next chapters that do not involve taking out a further loan, such as debt management plans or individual voluntary arrangements.

 

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or any other debt secured on it.

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