What is Debt Consolidation?

Debt consolidation is the process of taking out one loan in order to pay off a number of others. This is generally done in order to secure a lower interest rate or fixed interest rate, but often simply for the convenience of making one reduced payment each month rather than several. It can effectively turn many of your debts into one manageable monthly payment.

It is possible to consolidate debts in two ways - from a number of unsecured loans into one, unsecured loan, or it can involve a secured loan against an asset such as a house, where the mortgage would be secured against it. The house is then regarded as collateral, and as such the loan provider can offer a lower interest rate as the risk to the lender is reduced because of the security of the property (i.e. in the event the borrower did not pay, the lender can force sale of the property in order to recoup their losses).

There are two main reasons that people choose to take out a debt consolidation loan.

• 1.   In order to make one payment each month rather than fretting over paying lots of different debts. This way the debts are paid with minimum stress. In addition, Many people take on too many credit card debts, and so have the stress of paying sometimes as many as 15 different credit card bills. This worry is removed if you get a credit card consolidation loan, that again allow you to make one payment instead of many.
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• 2.   Debt consolidation can lower your interest rates and thus reduce your monthly payments considerably. 
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• When you consolidate your debts it becomes easier to manage your finances as the number of people you need to pay is vastly reduced - to just one. Debt consolidation can make budgeting easier, and helps you keep on top of your finances. If you look at interest rates, for example, if you have 6 credit cards with an APR of 19%, this could be reduced to sometimes as little as 8% APR, allowing for a significant monthly saving with a debt consolidation loan. The saving over an entire year can be extremely helpful in managing your debts.

For more information on debt consolidation or alternative debt solutions, click the links below.

Is Debt Consolidation for Me?

Applying For Debt Consolidation

Debt Consolidation FAQs

IVAs

IVA Extraction

Bankruptcy

Debt Management

Debt Consolidation

Trust Deeds (Scottish Residents Only)

Alternatively, to discuss debt consolidation or any other debt solutions, please call 1Stop Money on  0800 012 4039 or fill in the online form and a 1Stop Money broker will contact you as soon as possible.       

1Stop Money - your first stop for finding the debt solution you need.