Will debt consolidation make my debts more affordable?

18 May 2010

One of the reasons people take out a debt consolidation loan is because it can make their debts more affordable - both on a month-to-month basis and over the course of the loan.

However, this is just one of the things you should think about if you`re considering a debt consolidation loan. Debt consolidation has its advantages, but it also has its disadvantages, and you`ll need to weigh up whether it`s the right option for you before you go ahead.

Debt consolidation loans

A debt consolidation loan is a new loan taken out to pay off existing debts. This effectively replaces multiple debts with just one, which can make your finances easier to manage. Many people find it easier to keep track of a single monthly payment than several different payments.

You may also be able to repay the loan over a longer period of time than your existing debts, thereby making each payment smaller. However, keep in mind that if you do this, you`ll be repaying the debt for longer, and may pay more interest as a result.

If your debt consolidation loan has a lower interest rate than the debts you`re consolidating, you could save money overall - but the longer you take to repay the loan, the less likely you are to save money in the long term.

That said, even if you do end up paying more in total, many people will accept this as long as their debts become more manageable on a monthly basis.

Is it right for me?

The most important thing you`ll need to think about with any debt solution is a simple question - is it right for your circumstances?

Debt consolidation loans are not designed for people who are really struggling with their debts and can`t afford their monthly payments. They`re a way for people with relatively manageable debts to reorganise their finances and, if they wish, free up cash for other things. As with any loan, you shouldn`t take out a debt consolidation loan unless you`re confident you can keep up with the repayments.

If you`re struggling with your debts, you should discuss your options with an expert debt adviser. For more help, click here for a free call-back or call us today on 0800 161 3516.

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