Debt Help UK

In April 2006, credit card debt stood at £56 billion in the UK alone. Added to mortgages and other expenses it’s hardly surprising then, that more people are turning to debt consolidation agreements to ease their financial burden.

It’s marketed as a tool for controlling growing debt and stabilising your finances at the same time, by managing all of your outgoings into a one-off monthly payment.

Taking out a debt consolidation agreement is worth thinking about though, as there can be both considerable advantages and drawbacks to the scheme.

The advantages are obviously found in the convenience of only dealing with one creditor with one payment to make each month, and as a result any problems therefore become easier to deal with.

Taking the right debt consolidation loan can also be greatly beneficial in the long run with less interest to pay. Equally, it can serve to give you a clearer picture about the timeframe you’re looking at to correct your finances.

But debt consolidation agreements aren’t always advantageous. In some cases, the interest in having one loan can actually outweigh that of the numerous debts you had to start of with.

The terms of a debt consolidation agreement can also be unfavourable to separate debts, so you must make sure to crunch the numbers before being charmed by the convenience debt consolidation offers.

The payments you already make might also carry a fine for settling them early which needs to also be taken into account when working out the best avenue to explore. This is just one of the hidden costs debt consolidation agreements can have.

A common trap that people fall into once they have consolidated their debts into one loan, is that they believe it’s ok to start spending again. If you chose debt consolidation, remember the ‘debt’ part still remains.

There are of course alternatives to debt consolidation, such as setting up an IVA or Individual Voluntary Agreement. However, this is only really for people with serious debts (over £15,000) and again carries as many cons as pros.

Debt consolidation is advertised as a glamorous, fast track route to getting out of financial trouble. Undoubtedly, for some people it can be a viable solution but before you take the step, make sure you make all the calculations.

Take a look at all our categories to get help with debt consolidation.