Debt Consolidation

Debt Consolidation advice from The UK Insolvency Helpline

If you are suffering with debt problems you will need to look at the current debt consolidation options available in the UK.
What is debt consolidation?

Debt consolidation is the process of transferring a number of unsecured credit cards or loans into another credit product such as a loan or credit facility. The aim of debt consolidation it to reduce the level of interest payable.

Sometimes, debt consolidation companies can discount the amount of the loan. When the debtor is in danger of bankruptcy, the debt consolidator will buy the loan at a discount. A prudent debtor can shop around for consolidators who will pass along some of the savings. Consolidation can affect the ability of the debtor to discharge debts in bankruptcy, so the decision to consolidate must be made carefully.

When is Debt consolidation advisable?

Debt consolidation is often advisable when someone is paying credit card debt. Credit cards can carry a much larger interest rate than even an unsecured loan from a bank. Debtors with property such as a home or car may get a lower rate through a secured loan using their property as collateral. Then the total interest and the total cash flow paid towards the debt is lower allowing the debt to be paid off sooner, incurring less interest.

The advantage that debt consolidation

When a person has high interest debt balances, companies can take advantage of that benefit of refinancing to charge very high fees in the debt consolidation loan. Sometimes these fees are near the state maximum for mortgage fees.

In addition, some unscrupulous companies will knowingly wait until a client has backed themselves into a corner and must refinance in order to consolidate and pay off bills that they are behind on the payments. If the client does not refinance they may lose their house, so they are willing to pay any allowable fee to complete the debt consolidation. In some cases the situation is that the client does not have enough time to shop for another lender with lower fees and may not even be fully aware of them. This practice is known as predatory lending. Certainly many, if not most, debt consolidation transactions do not involve predatory lending.

Debt consolidation vs loans

The multiple options available to consolidate ones debts can be quite confusing, credit advising programs, debt settlement, debt consolidation loans, and bankruptcy are just a few options available today. Trying to find the best option to suit your current financial situation can be a difficult task. Debt consolidation is when you take all your outstanding debts and consolidate them into one loan which has a lower interest rate and therefore lower monthly repayments than you are currently paying.

Many debt consolidation programs are debt repayment programs. They can consolidate most types of unsecured debts from major credit cards to personal and student loans. You choose the accounts you want to enter into the program when joining. Once enrolled, the company will contact your creditors to negotiate more favorable repayment terms on your accounts and possibly reducing your interest rates and it may even elimination late fees. You will then send that company one lump sum payment monthly which they will disperse to the creditors you enrolled on your account when joining.

Beware Debt consolidation trickery

Many debt consolidation loans are just home equity loans in disguise. They use the equity built up in your current home loan and use it to repay all of your unsecured debts. These types of loan options usually come with heavy application fees and can greatly extend the amount of time it will take you to pay off those debts. These loans also convert all of your current unsecured debts into on secured debt which is now backed by your home.

If you fall behind on your payments you could risk losing your property. Ostensibly debt consolidation is when you take all your outstanding debts and consolidate them into one loan which has a lower interest rate and therefore lower monthly repayments than you are currently paying.

Debt consolidation Options

In the UK there are a range of debt consolidation to suit individual requirements such as:-

• Debt Management Plans
• Informal Arrangements
• IVA
• Consolidation Loans
• Bankruptcy
• Administration Order
• Trust Deeds
• Sequestrations
• Debt Solutions
• Debt Help
• Debt Repayment

If you are unsure about your options, try The UK Insolvency Helpline debt consolidation team on 0800 074 6918. A dedicated case adviser will explain some of the debt solutions available, based on your personal situation. Whatever your debt consolidation needs, contact us today for confidential and non-judgemental advice and the best professional service.