During the UK's recession, many people suffered from financial hardship, which led to an unprecedented amount of individuals across the country seeking some form or another of debt relief. Indeed, during the recession the public borrowed more than £175 billion. circumstances have. Now many of these people are faced with the daunting task of attempting to pay off student bills, credit loans or a home mortgage, one of the best options may be to choose a vehicle known as debt consolidation. There are numerous companies that offer this possibility and as the country is by no means out of the financial turmoil in recent times, many more consumers are considering this remedy as a solution.
The Basics of Consolidation and Its Advantages
As the name suggests, debt consolidation is the ability to combine existing loans into one monthly payment. These can include mortgages, car payments, student bills and any credit loans. Not only will this make the payment process easier but it may allow for the entire lump sum owed to be paid under a lower interest rate; potentially saving money in the long term. Finally, may agencies will work with their customers to help them restore their credit ratings during this period.
So, some of the advantages of this type of financial relief can be:
- One monthly payment.
- The ability to improve a current credit rating.
- Lower interest payments and a reduced overall cost.
However, it is important to recognize that not all consolidation plans may offer the best solutions and there are instances where this option may actually present more drawbacks than benefits.
A key aspect of determining whether consolidation may be the best option is to examine the interest rates carefully. It should be obvious that if the rates quoted are not lower than the ones you may be currently paying, it makes no sense to consolidate your loans. Another important consideration is the amount of time required to pay off the lump sum. There are instances where making only the minimum monthly payments may actually cost more money in the long-term, as more interest payments will also be accrued due to the longer time period involved. Finally, reading the "fine print" on many such services is absolutely essential to determine whether there are any hidden fees that will be charged.
To review briefly, some of the possible pitfalls of this type of debt relief can include:
- Higher interest rates being charged.
- The length of time given to pay off the entire sum.
- Any hidden fees that may be attached to the plan itself.
Choosing this option as a form of repayment depends on differing financial situations. While it is obviously essential to speak to a qualified financial adviser in order to determine the best way forward, let us also address some of the most frequently asked questions to help clarify some common questions.