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Debt consolidation involves combining multiple debts into a single, more manageable debt. This can simplify payments and potentially lower interest rates, making it easier to manage your finances. Consolidation can be achieved through various methods, such as balance transfer credit cards, consolidation loans, or debt management plans.
The primary goal of debt consolidation is to reduce the number of creditors you deal with, making it simpler to keep track of your payments. By consolidating your debts, you may also be able to secure better terms and rates, which could reduce your overall debt burden and monthly payments.
However, while debt consolidation can offer relief, it's crucial to choose the right method for your situation. Not all consolidation options are the same, and some may come with additional costs or impact your credit score. It's important to evaluate each option carefully and consider how it aligns with your financial goals and circumstances.
Personalized Solution
Your debt consolidation plan can be tailored to fit your specific financial situation, ensuring that your new payment plan is manageable and suits your budget.
Efficient Setup
Debt consolidation can typically be set up quickly, often within a few weeks, depending on the method you choose and your financial institution.
Streamlined Payments
By consolidating your debts, you'll simplify your payment process, making it easier to manage your finances and reduce the stress of multiple payments.
Potential Savings
Debt consolidation can potentially save you money on interest, especially if you qualify for a lower rate compared to your current debts.
About Debt Consolidation
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What's Debt Consolidation?
Consolidating your debts involves combining multiple debts into a single solution, which can be particularly beneficial for those who owe money to several creditors. Managing multiple debts can be overwhelming and confusing, so finding a way to address them all at once might be a smart move. There are various methods to consolidate debts, making it a worthwhile option to consider if you're struggling to stay on top of your financial obligations.
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How Can I Consolidate My Debts?
Debt consolidation can be done in a variety of ways to make things easier for you, however, you should be aware that not every type of debt is the same, and some may not be eligible to be consolidated along with others in certain schemes.
It’s important to consider which option would suit you and your personal situation before making any decisions. Below are some of the main solutions which allow a form of debt consolidation:
IVA – This allows you to enter certain debts into an agreement, where you make one monthly payment which goes towards them all and the rest is written off.
Bankruptcy – If you have little to no ability to pay off your debts, you can apply for Bankruptcy and these can be written off after one year. Your assets may be sold to contribute towards repayments to your creditors.
Debt Relief Order – Here, you can freeze your debts for a year and have eligible debts written off after this time.
Debt Management Plan – You can combine eligible debts into one monthly payment handled by a 3rd Party Company. Your one payment contributes towards your debts, as well as the fees of the company handling it.
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Consolidation Loans
Another method of consolidating your debts is done by a ‘Consolidation Loan’ – this is where you open a new account and use the credit from this account to pay off other credit card and loan debts. In doing so, you may be able to close down certain accounts or at least reduce the amount owed to them. This doesn’t reduce your overall debt level, as you will still owe money to the new account to cover the credit you have used – but it does mean that you may be able to reduce the number of creditors.
By paying off multiple old accounts by borrowing credit, you essentially transfer the debts to your new account – so instead of dealing with numerous creditors, you consolidate these into one.
Things to be mindful of:
It’s important to remember that with a Consolidation Loan, you don’t reduce the amount of money you actually owe, you just move it all into one place.
It’s crucial that you keep up payments towards your new account so that you don’t land in further financial trouble. It’s always worth looking into this thoroughly beforehand and consider what your monthly repayments would be exactly, to understand whether or not this is an affordable option for you.
By opening up a new account, the new lender will have to carry out a ‘hard’ credit search, which will have a negative impact on your credit score. However, keeping up regular repayments is the best way to improve this again, and in doing so your score will increase over time as your overall debt level decreases.