Posted on: 11th May 2015
For much of recent history, consolidation loans have represented nothing less than a Godsend for millions of everyday households where debt seems to have taken over.
These days, the idea of living a normal life without at least some form of debt treads a fine line between idealistic and wholly unrealistic – getting by without debt is nigh-on impossible. Fromto personal loans to credit cards to overdrafts and more, debt is a part of the modern way of living and this isn’t likely to change at any time in the near future at least.
As such, it’s hardly surprising that debt often has a tendency to get well and truly out of hand, leading to scenarios where those with the debts end up paying out more each month than they have coming in. And when this happens, consolidation loans have the potential to switch the balance back in favour of the debtor and make things much easier to handle.
However, financial advisers across the UK are increasingly advising their clients to think more pro-actively about consolidation and not just to see the option as a lifeline for desperate times. It’s wholly possible for consolidation to save the lives, (financially speaking) of those facing the worst possible debt overloads, but why wait until things hit crisis point before making the effort to set things straight?
They say prevention is better than cure – the same applies to the world of personal finance, debt and consolidation.
While consolidation loans are primarily marketed toward those with severe debt problems, they tend to be readily available to anyone that wants one. It’s a very simple and yet uniquely effective principle, whereby all existing debts – credit cards, loans, overdrafts, hire-purchase etc. – are paid off with one single loan with a much lower rate of interest. Instead of paying dozens of credit bills each month, you pay just one bill at one rate of interest, potentially saving a small fortune every month as a result.
So really, what’s on offer is a drastic cut to monthly expenses and the ease of switching to a single monthly payment instead of a much larger number of separate payments. Regardless of whether or not debt is crippling your lifestyle therefore, it could make so much sense to consider consolidation – even if strictly speaking you don’t desperately need to.
Credit Score Caution.
There is however one very important proviso to be aware of before going ahead with any such loan application – make sure it will not affect your credit score. In general, a loan is a loan and will, if anything, add a little extra to your credit score, if, of course you meet your obligations as laid out upon agreeing to its terms. However, there are some consolidation loans on the market that are designed specifically for those with severe debt issues, which means that applying for them, (even if successfully) can add a rather unfortunate question mark to your credit report.
As such, don’t dive in until you’ve first sought the right independent financial advice and made sure that the loan you choose is the right loan for you.