Consolidating your existing debts into one smaller monthly repayment is a route often suggested by lending companies and adopted by some borrowers.
If used properly, restructuring debts through consolidation can help alleviate your burden but it may not resolve your debt difficulties in a reasonable time period.
By reducing the interest of existing borrowings and bringing repayments within budget this will generally lengthen the time before you are financially independent.
On the other hand, if there are more serious underlying problems which are not addressed it may grant temporary relief before creditors contact you again.
Pros and cons
A debt consolidation loan could be a suitable option if you're paying high interest charges on your existing debt. If you need to reduce the size of your monthly payment, or if you need to release additional money to meet unexpected commitments then freeing up extra cash from your home is a potential solution. This can help ensure your monthly repayments don't increase.
However this option may not be the best choice if you've already consolidated your debts several times in the past.
Please consult an Independent Financial Advisor (IFA) before taking steps in increasing your liabilities
Secured and unsecured loans
Depending on whether you are a homeowner or tenant, consolidation loans come in two forms.
Secured loans are typically secured on your property as a second charge. Due to the greater security for the lender with this type of loan, larger sums can be borrowed, often over a longer period.
An unsecured (or personal) loan is the alternative. The majority of these types of loans are available for up to 5 years but interest rates are likely to be higher as they are not secured against your assets.
Please ensure you consult an IFA before you make a decision to increase your overall debt.
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