Debt consolidation is something that has been in the news a lot in recent times. With the credit crunch biting down hard on people who have any sort of debt it comes as no surprise. Debt companies are getting hit as hard as anyone else and with new regulations on who can be lent to many are having to recall loans or be stricter.
Various Governments have tried to combat this by setting up a number of different 'reasonable lending' policies, to varying degrees of success. But that is only helping so much. With the number of foreclosures, bankruptcies and CCJ's rising constantly, as well as such a large number of job losses happening every month it comes as no surprise to hear that many people are struggling under the weight of their debt.
Debt consolidation loans
A debt consolidation loan is, as it sounds, a way of consolidating all your debt into one loan. Put simply it is a loan for the same amount as all the debt that you have with various companies. You then use this loan to pay off the debts – meaning that you get out from debt with numerous companies and now only owe the money to one.
This can be used to all sorts of debts. Loans, credit cards, overdrafts etc all can get serviced by a debt consolidation loan. This stops the problem of having all your debt spread over so many people.
The benefits of a debt consolidation loan
So what are the benefits of a debt consolidation loan?
- You are able to move all your debts into one easy to manage account, no forgetting what you owe to who.
- Legal action to recover debts can be stopped as you will be able to pay off all that you owe.
- You can stop debt collectors phoning and calling around
- The monthly payments will be less.
That last one deserves some special attention. The reason that many people have problems serving their debt is because they struggle to meet their minimum monthly payments. When you think about it you will see why. An average person will owe money to about 4 different lenders, That is 4 different minimum monthly payments that need to be met.
Because they are worked out separately those 4 payments can be quite large individually, and especially so when added together. But by having all the debt in one place, with one monthly payment, you are able to dramatically reduce the amount you are paying out each month.
Rather obviously a reduced monthly payment will have a huge impact on your own finances. You will have more money to spend each month, allowing you to no longer struggle to meet your payments and allowing you to do more with your money – holidays, house renovations, whatever you want.
Debt consolidation loan's aren't for everyone, but they can be a huge benefit to anyone who has numerous debts and wants to reduce their monthly bills.