Consolidation Loan / Re-finance / Mortgage
Apply to a lender to clear your debts.
A consolidation loan basically means that all (or the majority) of your debts are replaced by a single 'affordable' loan resulting in overall lower monthly payments.
Smaller loans, payday loans, store and credit card debts and others can charge high rates of interest and in some cases extraordinarily high rates of interest.
The very best interest rates are usually only available on bigger loans - that means that combining all your debt into one consolidation loan could reduce the overall rate and amount that you pay.
To work out if you can reduce your overall monthly payments you would need to add up all your debts and make a note of the rate you're paying on each. Then, compare debt potential consolidation loans and see what interest rates you could pay.
A consolidation loan will only really help if:
- it is used to pay some or all of the existing debt
- the new payments are lower than those (combined) that are being paid towards the existing debts
- the new payments are 'affordable'
If the above does not apply then it is likely that a loan may make the problem worse
- one affordable monthly payment
- the monthly payment should be lower depending on the interest rates charged
- there may be fees involved in setting up the loan
- the lender might insist that the loan be secured on your property which may lead to the home being put at SERIOUS RISK if payments are not maintained
- the size of the overall debt may increase significantly
- longer payment duration
- if all the existing debts are not cleared with the new loan then it is possible that the situation could be made worse and / or make it still difficult to maintain payments
- a poor credit rating may make it difficult to obtain a loan / refinance or result in less favourable terms / conditions / interest rates being offered
If you feel that refinancing would be a suitable solution for dealing with your debts then it is strongly advisable to seek independent advice and obtain / compare at least three separate quotes from reputable lenders, carefully checking the terms / conditions / fees / charges / interest rates etc before making any decisions.