What You Need To Know About Debt Consolidation

When you opt for using a debt consolidation solution, you take all debts you have with various lenders and consolidate them into one loan (or new debt). For those stuck in a cycle of higher interest payments or who are not yet behind in payments but are facing the possibility of becoming so, this solution is best. The ugly cycle of interest growth, where higher and higher portions of your income are used to pay off interest as your debt continues to grow, incurring more interest, is stopped with a consolidation loan.

Getting a consolidation loan could help you take advantage of payoff agreements with your current creditors. This means you could cut some fees, lower some of your owed balance, and thus lower your overall debt. Your new loan will be a fixed tenure, flexible, or revolving credit plan at a more reasonable interest rate. Other options that are not as savory include renegotiating your debts, getting a credit counselor, or transferring funds from one credit card to another in an effort to lower interest. Sometimes, money can be borrowed against retirement funds or by refinancing or taking a second mortgage on your home.

Debt consolidation can be much more beneficial and easier to do, but it requires that you find a reputable and reliable debt consolidation company with the financial backing to guarantee your loan. The loan itself will usually pay off all your creditors automatically and you’ll be given a single monthly payment to just your consolidation lender.

There are many advantages to debt consolidation:

*A single interest rate rather than multiple interest rates to multiple lenders. *High interest rates and late fees are eliminated. *Reducing and eliminating your debt happens much sooner.

Likewise, debt consolidation has drawbacks too:

*Your credit is put on hold, which means you can open no new lines of credit. *Your credit rating may be negatively effected for a few years.

If balance transfer options do not help in relieving you from debt burden, a debt consolidation loan is the best option. Obviously, a debt consolidation loan is still contingent on your ability to pay and your credit. So if you’ve already fallen down the slippery slope of spiraling debt, late payments on your chase visa cards, and other bad credit mishaps, you may not qualify for a consolidation loan.

The sooner you get in to talk to someone about getting a debt consolidation loan, the more likely you are to be able to secure one and start living debt free again. So if you’re looking at mounting debt with a credit cliff coming that you can’t help but fall from, find out about getting a debt consolidation loan as quickly as you can and stop your credit nightmare before you fall over the edge.

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Consumers Need To Be ‘wiser’ With Debt Difficulties

Britons need to take greater control of their finances, an industry expert has advised.

According to Susan Hannums, savings manager for AWD Chase de Vere, borrowing via credit cards and personal loans continues to be an attractive option for many consumers. However, with the Bank of England’s monetary policy committee raising the base rate five times over the last 12 months, those struggling to manage their outgoings as pressure on their finances steadily increases were advised to seek help as soon as possible.

She said: “People only tend to become wise to debt when the debt catches up with them. I think that interest rates have gone up and people are feeling the pinch with mortgage rates and debt across the board.”

The manager also reported that the majority of people who encounter problems with their finances only really begin to pay attention when they reach the point where they are absolutely required to do so. “You’ve just got to be totally sensible. Debt in this country is completely out of hand. At some point you’ve got to start clawing back and be sensible with your spending,” Ms Hannums added.

Meanwhile, those who want to take out a credit card to fund their finances are advised to do so with caution. The AWD Chase de Vere representative claimed that consumers should take the time to consider whether they will use the method of borrowing either to transfer previous debts or to carry on spending. For either use consumers are advised to look for the lowest interest rate possible, keep expenditure on the card “down to a minimum” and pay off bills as quickly as possible to reduce financial pressures. However, as the country’s problems with managing finances continue, she suggested that Britons could be set to run up further debts as financial providers look to attract consumers into using credit cards.

“There is so much existing debt already out there and this is the problem. There is so much money to be made from the bank’s point of view so as long as there’s that money to be made there will always be banks fighting for the business and they’ll do whatever they need to do to get the business,” she advised.

Earlier this year, research carried out by the Motley Fool revealed that some three out of seven consumers who had taken out personal loans in the past were open to the concept of borrowing again at a later stage. Despite 60 per cent of respondents reported to be determined never to borrow money in the future, a quarter said that they could not entirely rule out doing so.

David Kuo, head of personal finance for the firm, claimed that although getting credit “may seem like a convenient way to plug a hole in your spending plans”, the best way for Britons to lessen pressure on their day-to-day finances is by reducing their general expenditure habits. Overall, the average borrower was shown to have taken out 7,000 pounds, payable over a three-year period.

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