Lots of people will be reviewing how they spend their money due to decreased income from furlough or uncertainty of the future, where unemployment levels are forecast to increase.
This may include reviewing credit card and loan debt to see if savings in interest can be made.
Having one lender with low interest may also make the monthly juggle of who gets paid what more manageable as well.
The common way to achieve this is consolidation, be it a loan or consolidating debt on a number of credit cards to one card.
Loan interest will typically be below that charged on uncleared credit card debt and some banks will lend up to £25,000 without security on a property or guarantee from family and friends.
The comparison sites allow you to easily see the interest rates offered by lenders, but some sites may have links to some and may promote them, which may be misleading.
Using a few comparison sites will give a clearer picture.
Before deciding to use consolidation, review your finances to find what is affordable to make sure that you benefit from the change. You also need to find out how much you need to borrow and over how many months or years.
The benefit of consolidating to get a cheaper rate is easy to see.
Other benefits will include:
- One payment each month
- The reduced interest rate will mean if you keep top the same payment, you will become debt free faster
- You can increase the repayment term making your monthly payments more affordable
- Monthly loan payments are fixed and won’t change with interest rate changes, meaning the payments will improve your credit score, and that may help make better deals available
Some of the problems with consolidation could be:
- If your credit rating is poor, you may not get the best deals
- Repaying over a longer period to make the payments more manageable, may mean you pay back more overall
- Some lenders may want a setup fee and is something that needs to be considered in choosing the right lender
- If you repay an existing loan early, you may be charged an early exit fee
If you own your own home, borrowing against that may give even better rates or allow larger sums to be borrowed, but come with the risk that if you default, your home is at risk.
The same applies to equity release.
If you have a debt problem and you aren’t making your minimum payments each month, we may be able to help you find a solution that works for you.
Contact us HERE to discuss your options.