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With Debt consolidation all your debts such as loans, credit cards and store cards are combined into one new loan, paying off multiple creditors. The loan can be either secured on your house or unsecured, in the form of a personal loan or credit card.
This is dependent on your circumstances. You should consider debt consolidation if:
We all know that debt consolidation can be a risky strategy to clear your debt. Avoid the risk by ensuring that you have control of your spending to before you take out a debt consolidation loan. Use our free our SOA as a guide to gain control over your spending.
If you are considering re-mortgaging to release equity in your house then the company must be registered with the FSA. This requires them to provide you with certain information before you sign a contract.
If your secured loan is a second charge then currently the FSA does not regulate this in the same way as it does mortgages. The secured loan company must have a Consumer Credit Licence issued by the OFT. This imposes certain conditions on them which require them not to mislead you.
Normally you will not be able to get an unsecured loan above £25,000. The OFT regulates all companies which provide unsecured loans.
To get the best debt consolidation loan the best thing to do is to shop around. Use brokers who have access to the whole market. Do your own calculations, i.e. how much can you afford per month, before you approach a broker.
This depends on which provider you use. Some can do it relatively quickly, i.e. within 2 weeks. Some may take longer, verifying the valuation of house and income etc. may add a couple of weeks.
If you have a good credit score then getting debt consolidation using an unsecured loan may be a good option. You can get loan approvals over the phone and have the money in your account within days.
Using debt consolidation to pay off all your debts will have no negative impact on your credit rating. However, your credit rating may be impacted if you have missed payments or have any CCJs or decrees against you.
It's worth shopping about for any kind of debt consolidation loan. With secured loans, the interest rates can vary widely so do your research before you commit to a loan.
The costs, how much you can borrow, over what length of time and the Annual Percentage Rate (APR) will depend on:
You will also need to be careful about whether you can meet the repayments on your secured loan. If you default, you may lose your home.
The key to effective debt consolidation is have control over your finances. To help achieve control we recommended you complete our SOA and get your finances back on track. Once you complete your SOA you'll find that you understand where the solution lies to your financial problems.
And remember - our debt forum is here to offer you help and advice whenever you need it.
Don't let your debts drive you down the highway of despair - take back the controls and get on the road to financial happiness.
Debt consolidation can be an effective way to address your debt problems. Combining all your debts into one new loan can be an effective way of managing multiple debt problems. There are various ways in which your debt can be consolidated; through a re-mortgage, an unsecured loan or a secured loan. However, the pros and cons of each option should be carefully considered. Click here to read more about debt consolidation.