Debt consolidation loans

If you have a number of debts, for example store cards and credit cards, where the interest rates are relatively high, then a debt consolidation loan could be worth considering.

Typically these loans allow you to borrow money from one lender to pay off borrowing from a number of other lenders, the loan will usually be at a lower interest rate than you are paying to the other lenders, and the laon may be repayable over a longer period (five years or more is not uncommon). The effect of this is to reduce your monthly outgoings to a more affordable level.

What to check for

First it is important to understand whether the consolidation loan will be secured on your property (if you fail to keep up payments you could loose your home) or unsecured.

Secondly, you should take into account the length of the loan and the comparitive interest rates to those you are paying on your existing borrowing. It would not usually make sense to pay loans at a lower interest rate by borrowing at a higher rate. Student loans for example often have relativley low interest rates.

Finally, you should look at the length of time the debt consolidation loan would be over, the longer the time the more interest you will pay in total.

If you are in any doubt, then you should get advice from an independant financial advisor

Debt consolidation loans

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