Debt Consolidation Loans: The Facts
People take out loans for all sorts of reasons, but research shows that a third of loans are used for debt consolidation, so as repayments can be turned into one manageable monthly sum.
Why debt consolidation?
Many people are starting to wake up to the idea of reducing their outgoings and see debt consolidation as a positive way to keep creditors happy and still have a little cash left in the kitty as the end of the week.
Can debt consolidation help you?
Consolidating debt into one affordable sum can bring some key benefits for those who want to settle bills that have been clinging on for a while. Often creditors will offer a generous settlement figure for debt clearance.
The main culprits that can be zapped with debt consolidation are high interest store cards, credit cards and personal loans.
Who uses consolidated loans?
The South East and London are the two main areas where consumers are seeking debt consolidation loans and over 35% of people have acquired loans solely to manage debt. Unsecured loans have been the most popular choice.
The average amount of debt consolidation loans being taken out is estimated at around £13,000 which shows how a stream of credit can trickle into an ocean of debt.
Can it be used for credit card debt?
Credit cards are not recommended for debt consolidation and can clock up extra debt on the financial treadmill due to their high interest rates. A good unsecured loan will offer a lower APR and become the most cost effective way to manage debt.
What other options can get rid of debt?
Have you looked into getting a debt management plan, or perhaps an IVA (Individual Voluntary Arrangement)? They could be more suitable for you if you have larger debt. If you're not sure which debt solution to go with, you can get free advice. The Debt Advice Trust is highly experienced in this field, and will do all the tedious research for you to discover if a consolidated loan will work for you.
