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Getting Out of Debt with Debt Consolidation Loans

By Edited Nov 13, 2013 0 0

Being in debt is scary, but you do have alternatives.

Being in debt can be scary but it does not need to be. UK residents have many debt management tools at their disposal and debt consolidation loans are one of the most popular types. People use these loans to repay existing debts so they no longer have to worry about those outstanding balances. This allows them to focus on repaying the money they owe without worrying about high interest rates or unaffordable monthly payments.

What are debt consolidation loans?

A debt consolidation loan is used to combine all debts into one. A new loan is taken that equals the sum of all outstanding debts. Loan proceeds are used to repay each debt, leaving the consumer with only the consolidation loan to repay in monthly installments. Consumers take this route when they have high-interest debts because the loan interest rate is usually much lower than the rates for individual debts like credit card balances.

A consolidation loan can also make debt repayment more affordable because it typically extends the repayment period. This makes each monthly installment less expensive, allowing the borrower to live more comfortably. The individual is able to more easily afford each installment, lowering the chance of a late or missed payment. This prevents the loan balance from growing, keeping the borrower on the road to becoming debt-free.

Credit Card Interest Rates

How to find the best debt consolidation loans.

Interest rates and repayment terms for debt consolidation loans vary by lender. Consumers should take one of two approaches when shopping for these loans. They can contact each lender individually to learn more about the loan terms and interest, then select the most attractive loan. This requires knowing the names of all UK providers and spending substantial time online or on the telephone.

A more convenient approach is to contact a broker that scans the market to find the best deal on a consolidation loan. The prospective borrower simply completes and submits a brief online form and the company matches the individual with a dedicated debt management advisor. This person assesses the financial situation of the individual and provides a suitable consolidation loan.

Other options if I cannot get a debt consolidation loan.

Consolidation loans are not available to everyone but there are other debt consolidation solutions for those who do not qualify. A Debt Relief Order, or DRO, is designed for residents of Wales or England with few assets and low disposable income who cannot repay their debts. A DRO places a 12-month moratorium on unsecured debt repayment and after this period, covered debt is written off.

An Individual Voluntary Arrangement, or IVA, is a formal solution under which individuals repay a portion of their debts over a fixed period, typically five years. People with unsecured debt totaling £15,000, stable employment, and disposable income may be eligible if they are having difficulty making agreed payments to creditors. With both solutions, interest and charges on debts may be frozen by creditors. In addition, a person may want to consider using a reputable debt management planscompany to help them organize  their debt and work out a reasonable payment scheduled with creditors at reduced interest rates.

Is a debt consolidation loan for you?

Do you have a decent credit score, a stable job, and regular income? Are you finding it difficult to repay unsecured debts like credit card bills, overdrafts, and personal loans? If so, you may find the solution in one of the many debt consolidation loan available to UK residents who are at least 18 years old. Contacting a company that provides debt consolidation services is a smart first step in the war on personal debt.

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