Chiltern provide expert debt advice and debt help programmes for people struggling with their finances. It’s possible when seeking debt advice that a consolidation loan is recommended.
What is a debt consolidation loan?
A consolidation loan involves taking out a new loan that’s big enough to pay off some or all of your existing balances. This enables you to simplify things by making one monthly payment – which is much simpler than dealing with multiple amounts to multiple creditors.
It could also make your monthly payments less every month if it means you can pay off those with higher interest rates, or if the consolidation loan is taken over a longer period so that the payments are lower. This could mean that you are less likely to miss payments and go into arrears (which can damage your credit rating and lead to extra charges being demanded).
Is a consolidation loan right for me?
Consolidation loans aren’t always the best solution and it’s wise to seek impartial debt advice regarding all debt help programmes.
If you arrange to repay the new loan over a longer time period, to make the monthly payment more manageable, the extra interest charged over this period could increase the total amount you pay. Debt advice or a debt help solution from Chiltern could help you to find a better alternative solution.
Also, consolidation loans usually pay off credit cards, store cards, loans and overdrafts – freeing these up for future abuse. If you use this newly available credit to run up fresh debts, you could end up in desperate need of debt help – as you’ll have to repay these as well as your consolidation loan each month. A recent survey found that two-thirds of people who consolidated debts then went on to develop further debts – often by using the credit cards, loans and overdrafts that they had just paid off. Professional debt advice and a suitable debt help programme from Chiltern could help you avoid this.
A consolidation loan might not reduce your payments enough to make it more affordable if your current repayments are too high. Alternative solutions should also be considered – such as Debt Management or an IVA.
How do I apply for a debt consolidation loan?
Complete the form on the right and one of our experts will provide FREE debt advice. To talk to an adviser, for immediate debt help, call FREE on 0800 043 2332.