Debt Consolidation

What is Debt Consolidation?

Debt consolidation is aimed at those in financial difficulty, and allows such individuals to consolidate all their outstandning loans and credit cards into a single manageable monthly repayment.

Advantages of Debt Consolidation

The main advantages of Debt Consolidation are:

Reduce your overall monthly commitments, leaving you with more disposable income each month
Consolidating your short term finances such as credit cards and overdrafts into a longer term debt consolidation instrument may reduce the overall interest charge you pay
Using a debt consolidation product with a fixed repayment term provides peace of mind that you debts will be cleared within a known time horizon.

Disadvantages of Debt Consolidation

The main disadvantages of Debt Consolidation are:

Using a re-mortgage of your home to consolidate your debts may extend the time taken to clear your mortgage, and may use up some of the equity you have built up in your home
Consolidating your debts into a single manageable monthly repayment is only one part of the solution, you must also deal with the underlying causes of the problem, i.e. the reason why you got into such financial difficulty in the first place. This may involve curbing your spending habits if this is the root cause of the problem.
You must be careful to ensure you select the most appropriate lender to consolidate your debts, since there are a number of less scrupulous lenders out on the market which are more concerned with making profits than providing you with the best products and best advice

Debt Consolidation Products

There are a number of products available to those looking to consolidate their debts:

Individual Voluntary Arrangement (IVA)
Debt Management Plan

The Debt Consolidation Process

The process for consolidating your debt will depend upon the specific method used to consolidate your debts. A good starting point is to discuss your personal financial circumstances with a professional, who can advise you as to the best route to take.