Is it time to consolidate your debts?

19 July2021

Do you want to give your monthly budget a bit more room? Are you looking to replace several monthly payments with just one?

If this is the case, it could be a good idea to consolidate your debts with a loan. As long as you're comfortably repaying your debts from month to month, taking out a debt consolidation loan could help to make your debts simpler to manage - which could make a big difference to your overall finances.

Why would I want to consolidate my debts?

By consolidating your debts with a loan, you could:

  • Have just one payment to make every month, rather than several
  • Deal with a single lender, rather than many
  • Arrange payments you can realistically afford
  • Make it easier to protect your credit rating.

If you decide to take out a debt consolidation loan, your multiple debts will effectively be rolled into one, so you won't have to worry about keeping on top of a number of different payments to different lenders every month. This should make it easier to avoid the kind of mistake (like late payments) that can damage your credit rating.

You can find out more about how debt consolidation loans work here.

How much will I repay towards a debt consolidation loan?

For a debt consolidation loan to be suitable, you'll have to be confident that you can commit to regular monthly payments, and keep up with these until you've repaid the loan in total.

If you decided to secure the loan against your home, you could be putting your house at risk of repossession if you fall behind with your agreed payments.

However, one of the advantages of a debt consolidation loan is that you'll be able to arrange payments you can afford - within limits - as you'll have some flexibility when it comes to agreeing the size of your monthly payments.

Our debt consolidation calculator can give you an idea of what the size of your loan payments could be.

You may decide you want some more room in your budget every month for your other costs, in which case you could agree to repay the loan over a longer timeframe. Although this means interest will grow for longer too - which could cost you more in total - you'll have smaller monthly payments to make, so you won't see as much of your income go towards your loan repayments.

Alternatively, you may want to clear the loan in full faster - but this will mean making larger monthly payments, which could put more pressure on your finances every month.

Is a debt consolidation loan right for me?

As with any approach to your debts, you should get some professional advice before making a firm decision. You could discuss your finances with us - and ask us what we think is the best option for you.

Try our debt solution finder

Answer a few simple questions and find out which debt solutions could help you, based on your circumstances.

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Please remember, this is just an information tool. We would always recommend you speak to a debt advisor for the most appropriate way to resolve your debt problems.
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Tags: debt, loans, debt consolidation, debt consolidation loans

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