It can be really refreshing to find out about some things that could make a difference to your life, especially when it comes to finance – but a lot of the time the publicity sits around ways to reduce gas and electric bills and which suppliers offer the best value. Yet what does not get talked about too frequently is ways to reduce already existing debt. This may strike you as a bit strange, as most people have some form of credit agreement whether it is a credit card or a store card.
That is why you might want to learn a bit more about debt consolidation – a term you might have heard of before but not fully understood. This blog post will introduce a few key points on debt consolidation which you might find helpful either now or in the future.
What is debt consolidation?
First it is best to understand the concept itself. Debt consolidation is a way of paying back the money you owe, but by making payments to one creditor instead of a whole host of them. Many people have a number of debts such as those from credit cards or store cards; these could be paid off via a low rate loan which could cost less than continuing to make payments each month, especially when there is a high level of interest.
How long has it been around?
Debt consolidation is not a brand new idea, but as credit cards become more common and personal debt accumulates, debt consolidation loans have become more popular in the last few years.. It is worth having a look online to find out who is currently offering a form of debt consolidation loan. This is because the options available might change over time.
Who is a debt consolidation loan suitable for?
You may or may not be suitable for one of these loans, so it is always sensible to speak to a financial adviser if you are unsure. However in general, a debt consolidation loan is an option considered by people with a number of credit agreements who want to reduce the total amount paid overall. This is also true of those who pay over 16 percent in credit card interest and want to lower payments through a lower rate loan.
How can you apply for a loan?
In order to apply for a loan of this type, you can either look online at websites such as Zopa who deal with debt consolidation, or you can speak to a high street bank or building society. However it first makes sense to work out the average interest rate and total monthly payment costs of your current debt. You will then be able to compare this to the payment amounts for a new loan.
Where can you find out more about it?
If you would like to find out more about debt consolidation, you can speak to someone at the Citizen’s Advice Bureau. Alternatively you could look at the Money Advice Service, or book an appointment with an independent financial adviser.