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Debt consolidation

Consolidating debt is growing in popularity. The signs of this are everywhere. From television advertisements, to letters in your post box, offers of debt consolidation abound. Debt consolidation is a huge business and the primary reason for new personal loans is debt consolidation.

The offer can be very attractive. You get to pay off all your various high interest debts and instead, you owe one tidy lump sum to one lender at a much better interest rate. Caution is advised however. Often, the payments can last for years, and the debts seem to just stay as they are rather than getting paid off. If this is the case, debts that could have been paid off in months, end up being drawn out over years, with all the interest this entails. Another concern about debt consolidation is the false sense of security it offers. Many people who have been worried about their various debts often feel a huge relief at getting the whole lot transformed into one sum, and feel like they can continue to rack up more debts. Debt consolidation does not, in any sense, mean that the debt has been paid off. It is a fact that many people who consolidate their debts get into more debt once they can afford it again.

Most debt consolidation takes the form of a personal loan repayable at fairly good rates over a number of years. The most common items to be repaid are credit cards, followed by car payments and home improvements. In 2006, over one third of all loans will be for debt consolidation.

When deciding what personal loan to opt for, consumers must do their homework. Rates vary significantly from lender to lender and a slightly lower rate can have a large impact on the total amount repayable. There are many personal loans to choose from these days and rates are very competitive so you should be able to find a loan with a good rate that suits your needs.

Many people do not realise that they can take advantage of any bank or lender’s loan offers. They do not have to take a loan from their existing bank. If you see a better rate from another bank or institution, and the rates are good, and you trust the lender, that is the loan you should go for. Every year, consumers could save over £2,000 on a £10,000 loan simply by opting for the most competitive rates. Many people stick to their bank for personal loans even though the rate is poor. The evidence of this is that the high street banks have over half the market in personal loans while offering generally higher rates than some of the alternatives.

 

 

 

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