When it comes to debt consolidation, UK residents can rest assured that the government is looking out for them.
Directgov offers debt consolidation help regarding managing and finding ways to reduce debt.
Consumers who feel overwhelmed by debt they cannot repay should follow this advice. Doing so will help them eliminate debt and prevent it from making another appearance. Debt consolidation loans are popular and the government has a lot to say about them. Prior to taking one of these loans, consumers should attempt to make new payment arrangements with creditors or ask relatives for money.
They should also determine whether they are using existing credit options, such as a mortgage extension, personal loan, overdraft facility, store cards, and credit cards to their fullest extent.
National services like CCCS and National Debtline offer free debt consolidation help and may recommend a solution other than a loan. Consumers should always seek independent advice from sources like this before they take out a debt consolidation loan.
A personal loan from a bank or building society may feature a lower interest rate and will not negatively affect the credit score. If a consolidation loan is the only option, consumers should shop around to find a reputable lender offering the best terms.
Debt consolidation help in the form of a loan does have several advantages. A long-term consolidation loan is usually a better value than any short-term borrowing. The interest rate is usually much lower, which decreases the monthly payments.
With this loan, the consumer only needs to make one payment each month to a single lender rather than separate payments of a different amount to each creditor. A repayment date is established at the beginning so the borrower can see the light at the end of the tunnel.
While this funding can prevent consumers from falling behind on payments and ending up with a bad credit rating, Directgov warns that it also has potential disadvantages. Secured debt consolidation loans place the home or other asset at risk if timely payments are not made.
Debt consolidation loans come with added costs, such as setup and repayment charges. In addition, consumers may end up paying more money overall due to an extended repayment period.
By relying solely on a loan for debt consolidation help, some consumers find it difficult to renegotiate with an individual creditor if problems arise. When shopping for debt consolidation loans, bad credit consumers may only qualify for a high interest rate or secured funding.
If any debts remain after the loan is taken, consumers may have trouble affording those payments in addition to repaying the loan.
If consumers review all the information and decide that a debt consolidation loan is still the best option, they should follow several guidelines when choosing this funding.
Shopping around for the best terms can save money. Before applying for the loan, consumers should ensure that it will provide debt consolidation help.
If the loan is unaffordable, it will only worsen the financial situation.
Consumers using loans for debt consolidation help should keep tight control over their finances. They should be aware of costs or penalties for missed or late payments as well as early repayment.
By making every effort to repay the loan within the specified timeframe, they will get themselves back on the right track and can then practice debt-free living.