Home Features What is a Debt Consolidation Loan and how does it work?
Juggling bills and struggling with multiple repayments? Find out everything you need to know about Debt Consolidation Loans before you investigate whether one could be right for you
Dealing with multiple creditors when you’re in debt can be incredibly stressful. If you’re getting different bills from different people at different times, then it can feel like you have many plates spinning, and it can be hard to keep up with everything. However, help could be at hand in the form of a Debt Consolidation Loan. In this post, we discuss what a Debt Consolidation Loan is and how it works.
What is a Debt Consolidation Loan?
If you have numerous debts (such as loans, finance agreements and credit card bills), then you may be struggling to keep up with the repayments. This is where a Debt Consolidation Loan could be useful, as it allows you to merge them all into one loan to lower your monthly repayment.
With a Debt Consolidation Loan, you borrow enough money to pay off each of your existing debts, and this means that you only owe one lender.
How Does a Debt Consolidation Loan Work?
When you get a Debt Consolidation Loan, you can use this money to pay off each creditor. This then means that instead of paying off multiple loans each month, you only pay out one (larger) repayment that covers everything at once. You’ll have paid off all your creditors at once and then only need to repay the loan.
Although Debt Consolidation Loans can be secured, there’s no need to put your home at risk. Many companies, such as Likely Loans, now offer unsecured Debt Consolidation Loans, so your loan does not have to be secured against your home or any other assets.
It’s also worth noting that if you pay off your credit cards and store cards with a Debt Consolidation Loan, then those cards will remain open. To stop you using them again, you will have to close your account or cut up the card.
Is a Debt Consolidation Loan right for me?
Before you take out a Debt Consolidation Loan, you should consider getting some free debt advice. This is because they’re not right in every circumstance and could lead to further trouble.
However, consolidation loans do still have a place if:
You make savings on your repayments
You can keep up the repayments until you’ve paid off the loan
You can use the loan to get back on track with your money
You pay less interest than you would if you paid back each loan separately
Under the right circumstances, a Debt Consolidation Loan can be a good choice. Get some advice today to see whether they’re right for you.