A debt consolidation programme is when you take out a single loan to pay off all your other loans. Hopefully once you have consolidated all your debt into one monthly payment, it will lower your interest rate and maybe even your monthly payments too. Now that you only have one payment, you’ll only have one interest rate rather than multiple, ultimately helping you to save money. There are two different types of programmes you can participate in: secured and unsecured.
Secured Loans
A secured loan is when the loan is backed by one of the borrower’s assets, such as a car or in some cases, their house. The house and/or car then acts as collateral for the loan in case you’re not able to pay it back.
Unsecured Loans
As you’ve probably guessed, these are the opposite to secured loans. They are not backed by anything and can be harder to obtain. Once they are obtained, they can have lower qualified amounts, higher monthly payments, or higher interest rates; sometimes both. But, having said that, the interest rates will still more than likely be lower than what they would be had you not consolidated your debt.
There are several ways you can do this. The one most people go for due to credit card debt is a balance transfer to a 0% interest credit card. However, this does depend on your credit rating. If you have a bad credit history, the chances of you being able to do this does decrease. You can check your credit score through companies such as Experian’s Credit Expert.
If you’re a homeowner, you can use home equity loans; or if you are or were a student and you have a student loan, the government offers programmes to consolidate this too; but private loans aren’t approved for this programme.
Consolidating your debt is a great way to save money in the short term, and to reduce monthly payments and interest rates. However, the more debt you have, the longer you’ll be paying it back, which in turn could mean you end up paying more back in the long run. Analyse the debt you have, work out how much you can comfortably pay off each month and that should tell you how long it will take you to pay the whole thing off.
ClearCourse Business Services Limited T/A BrightOffice. Registered in England no. 06912469. Registered address: 107 Cheapside, London, EC2V 6DN.
© All Rights Reserved BrightOffice – Privacy Policy Cookie Policy Terms & Conditions Schedules