Consolidation Loan

Taking out one big loan to repay a lot of smaller ones. Because the new loan is often repayable over a longer period, the repayments on the consolidated loan are often a lot less than the sum of all those relating to the smaller loans. Beware of early repayment penalties when considering a consolidation loan.

Consolidating your existing debts into one smaller monthly repayment is often advertised as all that is needed to put an end to the stress-inducing demands made by nagging creditors. But consolidating existing credit commitments should not be considered a cure-all. If used properly it can help you get debt free faster. But if there are more serious underlying problems, then it may only grant temporary relief before the creditors start their hounding again.

Debt consolidation may be right for you if you`re paying high interest charges on your existing debts and want to switch to a cheaper alternative, if you need to reduce the size of your monthly payments, perhaps because of a reduction in income. or if you need to release additional money to meet unexpected commitments, freeing up extra cash from your home whilst ensuring your monthly repayments don`t increase.

A debt consolidation loan is NOT the answer if you`ve already consolidated your debts several times in the past, if this consolidation loan includes debt still owing from previous consolidations or if you want to move debts from credit and store cards so that you can start using those cards again.

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