When you have taken out a number of loans, credit cards and store cards over the years, it can be difficult to keep track of what you owe – especially if you have reached the stage where you no longer open the post. This is why some people choose to combine everything they owe by taking out a debt consolidation loan.
As well as not dealing with so many creditors, this type of loan can give you much-needed breathing space since the repayments are usually spread out over a longer period of time. If the interest rate is lower than your existing credit cards and loans, you could even end up paying less overall.
However, it is important to remember debt consolidation is a loan and you must continue to pay back what you owe in full. If you are already struggling to keep up, it may be a case of ‘robbing Peter to pay Paul’ – the debt, with interest, is still there.
If your debts are extremely high, it might be time to consider a debt management solution, such as an Individual Voluntary arrangement (IVA) or Debt Relief Order (DRO).