One of the most popular ways for people to settle debts to multiple creditors is to opt for a form of consolidation. This essentially means that, with the help of a debt advisor, you will be able to roll multiple debts into one amount – and that you can effectively pay towards several creditors wishing to take action with a helpful monthly payment. This is one of the more widely advertised forms of debt relief available in the UK today – it’s a route that has seen considerable airtime thanks to TV advertising and is therefore one of the first avenues that many people may consider when they are looking to lighten the financial load. However, while this method of debt relief may seem attractive, there are a few pitfalls you should be well aware of if you’re aiming to get yourself back on the financial straight and narrow.
As experienced debt experts we are able to discuss debt consolidation arrangements in great detail with you no matter what your circumstances may be, and no matter how much debt or how many creditors you may have in pursuit. Therefore, it’s one of many different routes we are more than happy to discuss with you should you wish to take on a form of debt management to bring yourself back into level fiscal territory.
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Why Should I Consolidate my Debts?
There are plenty of reasons why you may consider rolling your debts into one. For one, it means that you no longer need to make sure you are paying several different creditors at once – it means that you are effectively felling several birds with one stone, with the help of independent financial support. It is a great avenue to take if you are seriously considering erasing your debt for good – and if you are being pursued by multiple lenders at any one time. If anything, consolidation can help to simplify matters – though it is worth remembering that it may not be the best fit for everyone under such stress.
Help with debt consolidation is usually found in the form of a secured loan. This means that you will need to borrow money in a specific way – for example, by means of an existing mortgage. If your mortgage is too low or ineligible for such an avenue, you may need to consider re-mortgaging with an external firm, or you may even wish to look into equity release – where you effectively release some of the value of your property. Equity release loans can be appropriate for some people, but they do carry hefty penalties should you default on repayment.
A debt consolidation loan allows you to transfer your borrowing into one monthly payment – which, of course, means that you can shut down debt you are being pursued for from several existing creditors. It can be a very shrewd move to make if you do have multiple creditor pursuing you – but, at the same time, it will still mean that you need to make a monthly payment to clear a new balance – even if it may mean paying less on a more manageable basis that is overall easier to understand.
How do I Know if Consolidation is Right for Me?
We will always be happy to discuss the various routes and avenues that are open to you when it comes to debt support – and the best debt consolidation loans are just one of the main areas we will help you to look at in more detail. It can be tempting to transfer several chunks of debt into one neat package, but it can mean that you may owe more back in the long run thanks to varying rates of APR. A debt consolidation mortgage or otherwise is generally a good idea for those people or business who find themselves struggling to balance several creditor at once – and we are always happy to help either lighten the load or make things a little simpler for all of our clients.
There is also the matter of your credit rating. Other forms of debt support can result in you leaving with a black mark on your file for several years – this can apply to anything from IVAs to bankruptcy and beyond – whereas debt consolidation loans for bad credit can effectively render your debt paid in full – even though you are technically owing it to someone else now. It’s a route that is fairly obvious – though still rather clever – but should only be attempted by those who are in a good position to be able to make monthly repayments.
Why Might Debt Consolidation not be a Good Idea?
The main issue standing in the way of debt consolidation loans being the most cost effective and stress free debt relief avenues is the fact that APR and interest exists. There are fees and rates that will apply to various loans which mean that, long term, you are likely going to be paying back more than you ever owed to your creditors. Essentially, it could mean a lot of money to pay back simply for making sure that your debts can get settled sooner rather than later. Some loan companies and banks may even charge you extra for paying back early – as well as late – meaning you really are going to need to look into whether or not this avenue is cost effective for your particular circumstances and cashflow.
We offer debt consolidation advice UK customers rely upon regularly – and the best piece of advice we can give is to ensure that you are fully aware of how much you will be paying back to a lender in this way before signing any documentation. The big risk here is, as mentioned, paying back more than you owed previously – though, for many, the pros massively outweigh the cons. A debt consolidation loan will wipe out your debts instantly – meaning that you’re free from pursuit and the threat of legal action. Furthermore, your credit rating stands to survive the journey – whereas more formalised debt support options can leave a mark on your file for years to come. These are all factors to bear in mind – and reasons why our debt management experts can help you make the right decision for your money and for your peace of mind.
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What Other Routes Could I Take?
Debt consolidation loans are great for the right people – providing you have the capital available each month to clear the repayments expected of you, there’s no reason why you can’t make such an arrangement work long term. However, while other routes may carry credit-unfriendly touches, they may be friendlier upon your wallet – both short and long term. Consider the following before taking out any loans – no matter how good the deal may seem on the face of things.
We can also provide Help with IVAs to make your debts easier to manage. This can be a very popular choice for our clients – essentially, you allow a third party to take on your debt and to liaise with your creditors on your behalf. This means you are not only free from having to handle them yourself, but you only ever need to make a reasonable monthly contribution to the third party in return. Great news for anyone in a position to pay back regularly, and a viable alternative to a consolidation loan if you are aiming to save money overall.
You may opt for a DMP (Debt Management Plan) to help deal with your current money worries. With this you can work with an advisor and set up a way of managing your current debts more easily.
The Debt Arrangement Scheme is available for people living in Scotland and we can offer Help with DAS if you think this would suit you. It's quite similar to a DMP but you can get in touch to find out more about what's involved.
It's possible to choose a Full and Final Settlement to try and reduce your debt problems. F&F arrangements may not always work, but they can be an effective route towards relieving some of the debt you owe. In arrangement with an advisor, you can propose to one or more creditors that you pay back a lower amount than the debt being pursued – though still the majority, usually – with a lump sum you have to hand. This may mean releasing an asset to gain such value.
In many cases, having a Trust Deed is an option for Scottish customers – you simply agree to entrust your estate to a third party, who will then liaise with creditors on your behalf – a similar approach to an IVA, though with assets in play this may not be convenient for all comers.
For some people, Declaring Bankruptcy effectively wipes the slate clean, but at the expense of your credit being negatively affected – starting over will always, unfortunately, come with a price. This is often the ‘last’ opportunity many people aim to take – and it is an avenue we only explore with our clients should all other options have already been scrutinised.
If you are considering bankruptcy but live in Scotland, the Sequestration Debt Solution is available and offers a similar outcome if you are stuck with debts you can't repay. There are obviously different conditions and things to think about so we'd recommend talking to an expert about the process.