What is Debt Consolidation?
Debt consolidation in the UK is the process where a debtor takes
out a single loan to pay off other existing loans. This can be
done to secure a lower interest rate, and hence make lower
monthly repayments, or to just to simplify your repayment plans.
Unlike debt management, where your previous debts are not
cleared, a debt consolidation loan clears old previous debts,
once and for all.
Debt consolidation takes a number of forms; either as the
conversion of multiple unsecured loans into a new, unsecured
loan, or debts can be consolidated into a secured loan against
an asset, most often a property, which be used as collateral.
Because a secured loan offers less risk to the creditor, the
interest rate can be lower, and hence a consolidated loan can be
cheaper. The risk to you the debtor is that you could lose your
home if you fail to keep up repayments.
For most people in the UK,
debt
consolidation offers advantages to people with high levels
of credit card debt because at the present time credit card
interest rates in the UK are generally higher than those offered
by the banks. Other groups that would benefit from debt
consolidation are individuals with high levels of debt against
high street store cards, of which there have been some 14
million issued in the UK, with an average APR of about 30%. In a
recent report by the UK Competition Commission ("Store Card
Credit Services", September 2005), it was claimed that many
shoppers were paying inflated interest rates on their
chargecards and being overcharged by £ 100 million each year.
Clearly, for many people there can be benefits to simplifying
your credit commitments and consolidating them into one existing
loan, thus potentially:
* Reducing financial commitments * Reducing the risk of paying
fees due to late payments to one or more of your creditors *
Alleviating the stress in having to deal with multiple creditors
each month
How Debt Consolidation Works:
Debt consolidation allows you to make a clean start, converting
your existing commitments into a single loan payment. Debtsolver
will review your financial circumstances to make sure that a
consolidation loan is the best option for you. You should note
that a consolidation loan would usually be secured against your
home, which would be at risk. Hence, debt consolidation may not
be available if your financial difficulties are so severe that
your credit rating is adversely affected, and if your debt
commitments are very high. Under such circumstances an IVA or
bankruptcy procedure through the UK courts may be the most
suitable choice for you.
If a debt consolidation plan is the best option for you, your
old loans will be paid off and replaced with a new one on more
favourable terms, and your previous credit rating should be kept
intact. You will then have a new loan with a single monthly
payment.
If you still have any questions about a debt consolidation plan,
you can have a look at our
debt">http://www.debtsolver.co.uk/faq.htm">debt FAQ
page, or you can call us. For a non-obligatory review of
your finances you can fill out our debt problems application
form or call us directly at the number listed. All information
collected during the procedure is entirely confidential. It's
important to us that you aren't kept waiting, and you will hear
from us within 24 hours. Should you decide to use our services,
in most cases the necessary work can be done over the telephone.
However, if this is not possible or you would prefer to meet in
person, we can arrange for one of our Senior Advisors to meet
with you. Debtsolver operate a National service and have offices
throughout the UK.
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