When you have multiple creditors chasing you for payments every month, one way to make your debt easier to manage is through debt consolidation. This doesn’t wipe out your debt – it still remains to be paid – but it can help to manage your debt situation.
It can mean taking out a loan to pay off multiple debts so that you only need to manage one debt. Not all debt consolidation plans involve borrowing more money though, you can work with a debt management company like Debt Free Direct to draw up a debt management plan, so that you make one monthly payment that the debt management company then redistributes amongst your various creditors.
In short, debt consolidation is a means of making one monthly payment to gradually clear your debt.
- It’s great to have the clarity that you get with debt consolidation. Having only one monthly payment to make makes it easier to keep track of your outgoings.
- Sometimes, It can reduce the monthly outgoings to an affordable level if you are struggling to meet your debt repayments.
- If you take out a debt consolidation loan, it may be that you can reduce your monthly payments because the loan will last a longer period than your existing debts.
- There will be a record that you didn’t keep up with original credit agreements on your credit report if you reschedule them. This could make it more expensive or problematic to borrow money in the future.
- By spreading your debts through a debt consolidation loan over a longer period to reduce monthly payments, you may remain in debt for longer, as you’ll be paying a greater amount of interest overall.
Is it the right choice for me?
If you’re in debt, deciding whether you need debt consolidation will depend on your personal circumstances so you should seek independent medical advice before going ahead.