Consolidation
What's Debt Consolidation?
Consolidating your debts essentially means finding a way to combine them into one solution. It’s a particularly good idea for those in debt who owe money to multiple creditors, as dealing with so many at once can become hard to keep track of and things can get confusing.
If you are in debt and owing money to multiple lenders, it may be a good idea to opt for a solution that helps you deal with them in one go. Consolidating your debts can be done in a variety of ways and it’s worth looking into if you are struggling to get on top of things.
In most cases, we advise seeking debt advice from specialists.
Click “DEBT HELP” to start your journey, one of our friendly team will then be in touch to give you all the information you need to deal with your enquiry and refer you to one of our regulated associate experts.
We may pass you onto a FCA regulated debt advice firm for a full advice call who would look into a range of options for you, May not be suitable in all circumstances fees may apply.
We are a debt help lead generation organisation & may be paid a referral fee from the FCA regulated firms.
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 other ones 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.
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.
