A consolidation loan or debt consolidation loan is a loan that is used to pay off existing debts. The money owed is then transferred into this one loan which is paid in one monthly payment that is reasonable for the person that has taken out the loan to pay. The overall function and purpose of the loan is to reduce a person's outgoings, reduce interest rates and allow the cost to be spread over a longer period of time.
What are the benefits?
· One fixed monthly payment
· Smaller monthly payments- freeing up more money for other bills or spends
· Improved credit rating when loan is paid off
What are the bad points?
· If you do not follow correct financial advice, taking out another loan can put you in a worse financial situation. Churchwood Finance are a debt solution company the can help with this.
· The debt payment time will most likely be extended so this means paying the debt off over a longer period of time.
There are many ways in which to clear your debt, so how do you know what method will suit you best? You need to be fairly disciplined if you decide to take out a consolidation loan, for example, avoid credit and store cards. If you would like to borrow a larger amount of money then it is not recommended that you take out a consolidation loan, however this is possible if you are a home owner as you can secure the loan against your house.
You must remember to check with creditors and lenders that they will not charge you a early redemption fee. A fee for paying off the debt earlier than scheduled.
Another tip is to check that you are not owed any PPI (payment protection insurance) on your pervious loans. This has been mis-sold in the past and you could be owed a small or a substantial amount of money.
A consolidation loan can be secured or unsecured. Although a secured loan (for example, as mentioned earlier, against your house) offer lower interest rates, there is a risk of reposition if you fall behind on payments.
To take out one of these loans, you must have borrowings from at least two creditors but there is no maximum limit to the amount of creditors you owe money to.
What are the benefits?
· One fixed monthly payment
· Smaller monthly payments- freeing up more money for other bills or spends
· Improved credit rating when loan is paid off
What are the bad points?
· If you do not follow correct financial advice, taking out another loan can put you in a worse financial situation. Churchwood Finance are a debt solution company the can help with this.
· The debt payment time will most likely be extended so this means paying the debt off over a longer period of time.
There are many ways in which to clear your debt, so how do you know what method will suit you best? You need to be fairly disciplined if you decide to take out a consolidation loan, for example, avoid credit and store cards. If you would like to borrow a larger amount of money then it is not recommended that you take out a consolidation loan, however this is possible if you are a home owner as you can secure the loan against your house.
You must remember to check with creditors and lenders that they will not charge you a early redemption fee. A fee for paying off the debt earlier than scheduled.
Another tip is to check that you are not owed any PPI (payment protection insurance) on your pervious loans. This has been mis-sold in the past and you could be owed a small or a substantial amount of money.
A consolidation loan can be secured or unsecured. Although a secured loan (for example, as mentioned earlier, against your house) offer lower interest rates, there is a risk of reposition if you fall behind on payments.
To take out one of these loans, you must have borrowings from at least two creditors but there is no maximum limit to the amount of creditors you owe money to.