Loan Consolidation

Loan consolidation can be a perfect option for those wanting to get rid of multiple debts and the complexity of managing their repayment. With a consolidation loan you will usually benefit from a lower monthly repayment and possibly a lower interest rate; however you should be careful to ensure that the total value of the interest to be paid on the consolidation loan is not more than you would have paid originally.

Types of Debt Consolidation Loan

A debt consolidation loan can be categorised as:

• Secured debt consolidation loan – secured on your property, usually at lower interest rates than an unsecured loan.
• Unsecured debt consolidation loan – while still offering a significant reduction in interest rates over typical credit card rates, usually cost more than secured consolidation loans.

Reducing Repayment Pressure

Your personal circumstances will determine the kind of loan you need. If you own a property, a secured loan will probably be easier to obtain and will typically have a lower interest rate than an unsecured loan. The major downside to this option is that your house is at risk if you fail to meet the repayments of any finance secured on it.

If you do not own your home, a secured loan will not be available to you and your only option is an unsecured loan. While these do have slightly higher interest rates than secured loans, it will usually be less than those charged by credit card companies.

A consolidation loan can often be the best choice if you have a large number of loans and you struggle to keep track of each of the due payments. If you have a poor credit history, a secured consolidation loan is likely to be your only option as lenders may be unwilling to finance a new loan without collateral to support it.

Before taking out a consolidation loan, you should seek professional debt advice. Obtaining the right advice will enable you to evaluate the different consolidation loans on offer and identify the best one for you.