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Consolidating your debts effectively

Many households in the UK have high levels of debt these days, and for many debt repayment can be a real struggle that involves juggling an array of repayments and stretching the budget in order to try and accommodate all of the repayments that have to be made each month.

Although some people do manage to keep on top of their debts, for many others this contact juggling can quickly lead to missed and late repayments, which in turn can lead to damaged credit and a low credit rating.

There are a number of solutions available to those trying to ease their financial situation, and one of these is debt consolidation, which is where the borrower takes out a loan that is used to repay a range of smaller debts. There are a number of benefits involved in consolidating debts. One of the major benefits is that you can cut down on the number of repayments that you have to make each month, and this can reduce the hassle of managing your finances as well as reducing the risk of missing payments or making late repayments.

Another major benefit of consolidating your debts is that you could see a dramatic decrease in the amount that you are paying out each month, which in turn can mean that you are left with more disposable income and have greater financial freedom. If you are paying a number of high interest debts each month such as credit cards and store cards you may find that your monthly repayments really add up. However, with a consolidation loan you simply have to make one lower monthly repayment, which means increased convenience and ease and decreased repayments.

In order to effectively consolidate your debts it is important to exercise willpower, as it is all too easy to run up additional debts again after consolidating the old ones. You need to keep in mind that the reason for consolidation is to cut the number of debts that you have and reduce the amount that you have to pay out. If you then run up debts on your credit cards and store cards again you will not only be increasing the number of repayments you have to make each month but also increasing the amount that you are paying out, as you will now have the consolidation loan to repay on top of any other debts that you then run up.

For those that do not exercise willpower debt consolidation can often lead to increased debt and problems. However, for those that consolidate their debts and resist the temptation to run up additional debts again consolidation can prove a very effective solution to making debt repayment more manageable and more affordable.

You should bear in mind that there are a number of lenders that offer consolidation loans on a secured or unsecured basis, and in order to make this type of loan more viable and affordable it is important to shop around and compare a range of consolidation loans in order to find one that offers value for money and affordable repayments. For those that own their own homes, a secured consolidation loan could prove the most effective options, as there are longer repayment periods offered with secured loans, and this can help to further reduce the amount that you have to pay out on the loan each month.

Tom Smith
2nd November 2007

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