Debt Consolidation Loans
If you have started to accumulate debts from credit cards, store cards and loans, then one tactic you could use to keep track of them is to consolidate them. Many borrowers are turning to using a debt consolidation loan to transform multiple debts into one, easy to manage debt amount that is repaid every month.
There are a number of benefits to consolidating your debt, but overall it means that you are less likely to overspend during the month and end up paying one of your debts off late, or miss the payment date completely, incurring further penalties. As much as it might seem risky to apply for another financial product, it gives you a way to take control of your debt and move towards paying it off completely in the future.
What is a debt consolidation loan?
A debt consolidation loan is an amount borrowed from a bank, private business or individual lender, for the purposes of paying off existing multiple debts. Once the debt consolidation loan has been agreed, you can pay off your individual credit cards, store cards and loans, and are left with a single loan repayment you will make on a monthly basis.
Remember that you will need to apply for a debt consolidation loan that is large enough to cover your combined debt all at once. This will ensure you are consolidating all of your debts and making sure you can make a single repayment each month that will cover the entirety of the debt.
By transferring all of your debts into one place, it not only makes it easier for you to pay it off, but also less likely to incur penalties for missing individual payments during the month, since you only have one payment to think about.
Can I spend any of my debt consolidation loan?
By getting a debt consolidation loan you’ve already demonstrated that you would like to take control of your debt and combine multiple repayments into one single monthly repayment. If you have calculated your combined debt correctly you should have borrowed an amount that will comfortably pay off the total.
Unfortunately, whilst it might be tempting to spend the remaining loan amount if you have some left over, it’s always better to use your loan for its intended purpose. Spending your debt consolidation loan will only make paying it off harder, and might land you in more debt in the process.
Is a debt consolidation loan right for me?
If you feel like you are struggling to keep up with multiple debt repayments during the month, or have already incurred penalty fees for late repayments, a debt consolidation loan will help your current situation.
It won’t necessarily save you money, but the purpose of a debt consolidation loan is simply to make your overall debt easier to manage and to give you a clear path to paying off the debt within a certain time period. Depending on how long you’ve taken the loan out for, you can make affordable monthly repayments and ensure you don’t miss a payment ever again.
Advantages of getting a debt consolidation loan
- Combine your debts into one monthly payment
- Give yourself a clear path to paying off your overall debt
- Improve your credit score by keeping up with repayments
Disadvantages of getting a debt consolidation loan
- Consolidation won’t necessarily save you money
- If you don’t keep up with repayments your debt will increase
- There could be admin fees incurred when paying off your old debts