Consolidating Debt

Posted by Ben Ryland in Dealing with Debt on 9 January 2017 - Ben is a Senior Credit Analyst at checkmyfile.

Do you have what seems a never-ending mountain of debt and you’re struggling to know what you’re paying and to who? If so, you may be considering debt consolidation, in particular a debt consolidation loan.

A debt consolidation loan is most suitable for those borrowers who have multiple repayments going out each month to different credit providers, normally at different times of the month. Not only does this feel like you are constantly making repayments during the month, but keeping on top of what you’ve paid and when can be a logistical nightmare.

The loan allows the borrower to make one monthly repayment at a fixed rate to clear the debt included in the loan amount, rather than numerous smaller payments over the month.

Although the monthly repayment amount will likely be larger than any of the single monthly repayments you would be making, by having all the debt ‘under one roof’ the consolidated repayment brings everything together and you may be paying less each month for the loan repayment.

A significant advantage of taking the debt consolidation route is that it can take away the hassle and stress of dealing with multiple debts from numerous lenders. Depending on the number of separate repayments being made a month this can fast become an administration nightmare, and if you’re not the most organised person debt consolidation can help to keep the admin side in check – you know what you’re going to be repaying, when and to who.

A single repayment amount a month can also help your household budget effectively, safe in the knowledge you know specifically the consolidation loan repayment amount. As household budgeting is an excellent way of keeping your finances in check and under control, knowing your high number of debts are being paid via this loan method can make sure you have the funds available and if there’s any extra left over.

There is also the likelihood that consolidating your debts to a single repayment may leave you better off if the single repayment amount is cheaper than the individual monthly repayments, as you will not be paying interest on numerous different debts at differing rates.

A debt consolidation loan may not always be the best solution and the downsides to pursuing the debt consolidation route should be considered when making the decision.

By taking out a debt consolidation loan you could well be extending the timeframe to repay your debt and this could mean more interest paid on the debt. It is crucial to check the rates of interest for the consolidation loan compared with what you are repaying on the separate debts. The consolidated amount may not be the lowest interest rate and you could be paying more over the lifetime of the loan. You should also be aware of early repayment penalties when consolidating debt that still has time to run.

When looking at consolidation loans, you may also want to try and avoid the temptation of applying for more than you need. The purpose of this type of loan is to help you become debt free, and by taking more than you need it often defeats the purpose of debt consolidation.

If you are worried about your personal finances and want to talk to someone, there are numerous debt charities which can offer you free impartial advice, such as StepChange and the Debt Advisory Service.

Check Your Multi-Agency Credit Report

30 Day Free Trial

Does a Debt Management Plan Affect Your Credit Rating?

If you’re feeling increasingly overwhelmed by debt and aren’t sure what steps you can take next, the most important thing to remember is that there is plenty of help available and different solutions designed to get your finances back on the straight and narrow.

Published on 18 Jun 2019 by Kevin Pearce

Full Article

Late Payments & Defaults: What's The Difference?

When a lender checks your Credit Report, one of the most important elements it considers is payment history as reported to the Credit Reference Agencies. On a perfect applicant’s Credit Report, every credit account would be reported with a clean payment history, indicating that they are a low risk to the prospective lender, but in the real world this isn’t always the case.

Published on 23 Apr 2019 by Tom Blandford

Full Article

Do I Owe a Debt If It's Not On My Credit Report?

Information that appears on your Credit Report should (in most cases) follow a fairly predictable lifecycle. But don’t think that if an unpaid debt no longer shows up, you’re no longer responsible for it.

Published on 21 Apr 2019 by Tom Blandford

Full Article

Do I Have a Default? How to Find Out

For lots of lenders, coming across a Default on your Credit Report is a troubling sign. It’s certainly more serious than a missed payment or arrears on your file, which are likely to have less of an impact on your chances of being approved. A Default represents a key moment in the eyes of a lender: it shows that on a previous credit agreement you stopped being a borrower and became a debtor.

Published on 29 Mar 2019 by Jamie Mackenzie Smith

Full Article

Do I Have a CCJ? How To Find Out

If you have a County Court Judgment (CCJ) in your name, it can have a serious impact on your Credit Score and ability to borrow for the entire time it is active, as well as potentially affect the outcome of the checks carried out by prospective employers, landlords and insurers.

Published on 26 Mar 2019 by Jamie Mackenzie Smith

Full Article

How Bankruptcy Affects Your Credit Rating

In terms of negative information that could appear on your Credit Report, evidence of bankruptcy or other forms of insolvency is about as serious as it gets and it’s likely to adversely affect your ability to take out new forms of credit for a considerable amount of time.

Published on 7 Mar 2019 by Tom Magor

Full Article

Insolvency and its effect on your credit score

Contrary to the belief of some, insolvency is not a ‘get out of jail free card’. When you are declared insolvent, the entry remains reported for six years on your Credit File and will continue to pose a significant barrier to your chances of obtaining credit – even after the insolvency is discharged.

Published on 30 Jan 2019 by Tom Blandford

Full Article

Can you go to prison for debt

The short answer is: yes, you can go to prison for debt, but only if you fail to pay your council tax, any magistrates fines, TV license or fees relating to a motoring offense, and even then there are plenty of methods that are usually tried before a prison sentence is carried out.

Published on 22 Aug 2018 by Barry Stamp

Full Article

Northampton Court CCJ – Why is it on my Credit Report?

If you’ve been issued with a CCJ, chances are that it could appear on your Credit Report as having come from Northampton County Court Business Centre (CCBC), even if you or the claimant have no ties with Northampton whatsoever.

Published on 31 Jul 2018 by Jamie Mackenzie Smith

Full Article

What Happens When You Miss a Payment?

Late payments are a reasonably common entry on Credit Reports. They can occur against all kinds of credit agreements: everything from mortgages to store cards and unless you have a Direct Debit set up to make repayments automatically each month, you’re reliant on remembering to physically make your repayments each month. For a lot of people, this is where mistakes happen.

Published on 6 Jul 2018 by Kiah Phillips

Full Article
keyboard_arrow_left

keyboard_arrow_right

We are rated number 1 for customer service on