Debt consolidation is a process whereby you take out a new loan or increase existing borrowing in order to pay off multiple debts. Basically, this means you swap some or all of your creditors for just one creditor. You should then pay less every month and pay it all to a single source.
Debt consolidation in many cases is an unsecured loan, where a credit provider lends you some money to pay off all other loans. Because the loan is unsecured, you don risk losing your property if you don repay the debt.
In other cases re-mortgaging or taking out a secured on your property loan could help you to get some money to pay off your existing debts. But, if you default on repayments, the secured creditor can repossess your property or can have a claim on the proceeds if the property is sold.
You will be making one monthly payment on one loan rather than many payments to different creditors.
Your new monthly payments may be lower.
You may have to pay fees for arranging the loan.
If you have a poor credit rating, you may not be able to get a loan or you may be offered a higher interest rate.
The length of time you have to repay the loan can increase the overall cost of the loan significantly, so you end up paying more.
If you don clear all your existing borrowing, the new loan is likely to make your debt problems worse and make it more difficult for you to make all your repayments.
If the loan is secured on your house or other asset, then it could be taken from you if you do not keep up the payments.
How we can help
We don offer debt consolidation or refinancing service. Please contact a reputable credit broker or lender for advice.
The Insolvency Service booklet In debt? Dealing with your creditors.
We provide information and advice in relation to debt solutions available in England and Wales.
There is no charge for the initial financial review and initial consultationÂ over the phone. However, if you decide to go ahead with our bankruptcy assistance service fees will be payable. Click here for further details on our fees.
You have a 14 days cooling off period from the commencement of our service. If you decide to cancel the service during this time, we will refund you any fees paid to us by you for the service.
If you are made bankrupt, your property and assets could be at risk and your credit rating will severely be affected for six years. Click here for details on bankruptcy restrictions.
For further information about bankruptcy we recommend the Insolvency Serviceâ€™s booklet â€śGuide to bankruptcyâ€ť. The Insolvency Services also produces a guide which explains the various debt solution options. You can read it here: â€śIn Debt? Dealing With Your Creditorsâ€ť.
If you wish to know where to get free debt counselling and debt management services you should contact the Money Advice Service.