Benefits of consolidating your debt 

In this day and age, there is no shame in being in debt. In fact, most of us have been there at some point in our lives, struggling to make ends meet and having to go without certain luxuries to make sure that the bills are paid. Sometimes paying back your debts can seem a never-ending process. If you took out a loan, a couple of credit cards and a store card, paying back the minimum each month hardly makes a dent in the amount you owe. Even when you live frugally, you can end up finding yourself having to get into more debt as soon as something goes unexpectedly wrong, such as a plumbing disaster or an expensive vehicle repair.

Credit Card Deals

If you are clever, you can keep moving your credit card debt from one provider to another, ensuring that it is always on an interest-free deal. This can mean that paying back even the minimum can make a bit more of a dent in your total loan amount. It is worth considering, though, that there will inevitably be a fee each time you move your debt. That is not to mention the hassle it causes and the constant sense of dread as your interest-free period comes to an end and you know you’re going to have to move again.

The Other Options

Taking out debt consolidation loans is an opportunity to use a single loan to pay off several smaller debts. This could both reduce your monthly payments and make your finances a little easier to manage. By grouping together all of your debts into one single loan, you will also have just a single creditor. The disadvantage with this approach is that the likelihood is that your debt will be spread over an increased number of years in order to lower your monthly outgoings. However, the lower monthly repayments and less confusing finances may be all you need to get yourself back on track, meaning that you can pay your loan off early in the long run. Of course, this option only transfers your debts rather than wiping the slate clean. If you don’t feel you can continue to make repayments at all, you may have to look at other options, such as an Individual Voluntary Agreement, Debt Relief Order or, as a worst-case scenario, bankruptcy.

If you own your home and have some equity available, another option could be to consolidate your existing debts into a homeowner loan, such as the ones on offer from Evolution Money. These homeowner loans are secured against your house and they are likely to be an option for people who need to borrow quite a large amount of money — usually over £15,000. They are often offered at a lower rate of interest than unsecured loans because they are regarded as less risky for the lender.

The term ‘secured loan’ is often bandied around with little explanation, but what you have to understand about them is that when a loan is secured against your home, you stand to lose your home if you cannot make the repayments. Should you repeatedly fail to make your scheduled repayments, then the lender can repossess your home, which gives them a guarantee that they will get their money back. They will have checked that you had equity in your home before lending you the money.

That’s why it is crucial to ensure that you will definitely be able to keep up repayments before embarking on a homeowner loan and taking advantage of the lower interest rates they can offer. You have to balance the benefits against the risks before taking one out.