If you have fallen into the trap of debt and you have no idea how to pay off your debt and become debt free then you may wish to consider taking out debt consolidation. A debt consolidation loan when taken out correctly can help you to pay off debt that you have built up due to unsecured loans, credit cards, store cards, or home shopping catalogues. However, debts such as mortgage arrears need to be treated differently and you cannot include these in a consolidation loan. Check out the lowest APR on consolidation loans here.
A consolidation loan works towards you being able to become debt free by taking the total amount that you owe to all your creditors, adding this together, and then taking one loan out, with a low monthly interest rate.
For instance if you owe £500 on one credit card, £200 on another and have a loan with an outstanding balance of £5,000 you take a consolidation loan for £5,700 and then use this money to pay off your creditors. This then means that you are only paying back one monthly sum for the consolidation loan.
If you find a loan with a low rate of interest, you may be paying less each month than the total amount to separate creditors. Another way you may be able to save each month is if you spread out the consolidation loan over a longer period. However, while this keeps down the monthly payments you have to remember that you will pay more back in interest in the end.
If you are considering a consolidation loan as a way to become debt free then you may wish to contact a debt management team to help you find the most suitable deal.
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