Is debt consolidation a good idea? Well let’s start with the understanding of debt consolidation.
The debt consolidation loan
allows you to take back control of the debt.
This happens by combining it into one payment, which eliminates the risk of defaulting on payments and and eventually lowering the credit score.
If you have debt on credit cards, unsecured loans, unpaid bills and other agreements this can help you consolidate everything into one payment. However, it is worth approaching with caution because if you continue to spend on cards your debts can still mount.
If you have a poor credit rating you might also struggle to be accepted for a debt consolidation loan.
The nature of credit card debt makes debt consolidation loans the perfect solution. By paying off the card balance with the loan, the consumer is able to stop the high interest rate and penalty charges that could increase the debt.
A debt consolidation loan can help you reduce your repayments and manage credit cards, unsecured loans, unpaid bills and other agreements.
However, taking on a bigger loan is a huge responsibility and should be considered carefully. If the loan isn’t used correctly and you continue to use credit cards for instance, the problem can soon escalate.
Mr I Griffin, a debt solution plan user says: “In order to try and consolidate some of our existing debts we took out a secured loan of £35,000. We then quickly realised that we were solely using credit cards to pay other cards and just re-circulating existing debt.
“My wife and I have been in our IVA for 14 months now, and we have noticed a difference in our finances”.
Whether you need debt consolidation or not is ultimately up to you, but you can always seek debt advice so that you can get a professional opinion.