Mar 10 2010
Debts and Debt Consolidation
In this time of financial confusion (let’s face it, even those in the know are confused), thousands of people are trying to find a more affordable way to pay off their debts. And some of them are only making the minimum payments after robbing Peter to pay Paul. If this situation sounds uncomfortably familiar, perhaps it’s time you gave some thought to debt solution.
When you consolidate your debts, in effect, you gather all your debts together, work out the total and borrow the amount needed to pay off that total. The advantage of this is that you end up with just one loan, which is paid off at a manageable monthly amount. And, unlike your mortgage for instance, you will not just be paying off the interest but reducing the balance with each payment you make.
There are a number of debt solutions out there on the market but in general they can be divided between secured and unsecured personal loans. It is important that you understand the difference between these types of loan before you make any decision and certainly before you sign on any dotted line.
A secured personal loan means that the debt is secured to a homeowner’s property and, if the homeowner defaults on the loan, the property may be seized. This type of loan may be the only option available to homeowners with poor credit histories, and also a good solution for those who wish to borrow large amounts (up to £50,000 or more), or those who require a longer repayment period (up to 25 years).
If you have a good credit history, you may be able to get an Unsecured Personal Loan, although you should be aware that the lending criteria are even more stringent as a result of the credit crisis. With an unsecured loan you do not need to put up a guarantee, which means that if you fail to make the repayments you will not lose your home. However, it is vital when taking out this type of loan that you manage your repayments effectively and that you do not allow your debts to mount up again.
Various terms and interest rates are available to tempt you, and whatever the interest rate it is likely to be less than that charged on your credit card or storecard.
You will be able to borrow up to about £25,000 and take between 1 to 7 years to repay the loan and, in the meantime, we suggest you destroy your credit and storecards.
Both secured and unsecured personal loans can, if managed properly, help you to restore your credit history while saving you a not insignificant amount in interest payments.
To extend either type of loan, the lender will want to know that you have a regular income in the form of wages, so you do need to be employed. You can compare terms and conditions applied to the various options using online comparison sites; in fact, we would suggest that this is vital before you make any firm decision.
And don’t forget the good old Citizens Advice Bureau; they will help you to work out a debt management plan and negotiate with creditors on your behalf. Any payment plan agreed will be based on your ability to pay; if your income is severely limited you could end up paying just £1.00 a week and any interests accruing on your debts will be frozen.
In cases of severe hardship, you are advised to get debt consolidation help and contact the National Debtline as soon as you can.
