What Is Debt Consolidation

It is very easy at this time of year to find yourself in a situation where your debts

are getting on top of you, and you cannot maintain your monthly payments. It doesn't take too much really, just one or two purchases too many on your credit or store card, or perhaps getting a little carried away with your debit card not leaving enough money in your bank to pay your bills. Once you get yourself into this situation and the fees start adding up it is difficult to break free from the downward spiral without consolidating all your loans into a cheaper debt consolidation loan. If you find yourself in this situation you should consider all options open to you in order to improve your financial situation.

With debt consolidation you take out one large loan to consolidate all your expensive credit and store card debt, and unsecured loan debt, which will mean that you then only have to make one payment each month instead of having to make lots of payments to all your existing creditors. Although debt consolidation is not the best option for everybody, if you are finding it difficult to make ends meet you should definitely consider it before your situation has an adverse affect on your credit record. With the current economic climate should you leave it too late and receive a default through missed payments, you will probably find that you are unable to arrange a consolidation loan anymore.

Some people are concerned with the prospect of consolidating their debts by using a consolidation loan; for fear that they may end up paying more in interest as a result of doing so. This is not always the case however, especially if you have several high balances on separate credit or store cards that you are only paying the minimum amount each month. If this is the case you are mainly paying interest each month, and could take a very long time to repay the capital. When applying for a consolidation loan you will be told exactly how much the loan will cost you and you will have a definite date when your loan will be repaid.

To make sure that you end up paying as little in interest charges as possible you should make sure that you take the loan out for as short a term as you can comfortably afford to make the repayments for. It is also of the utmost importance that you make sure that any credit and store cards that you consolidate are destroyed to prevent any further borrowing on them, failure to do this invariably results in the debts being built up again over time, putting you in a worst situation than you were before you started.

In Summary

Debt consolidation can have a significant impact on your financial situation, but before you consolidate your debts you should seek debt advice and consider all your options.

by: Mark Dawson

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