If you have credit card debt or any other form of high-interest loan, you may be struggling to make more than the minimum payments each month, meaning that the actual debt never decreases. This situation occurs mainly when you owe money to a number of different companies, and one way of releasing yourself from the vicious circle of minimum payments is to consolidate your debts. Debt consolidation involves taking out another loan with a lower interest rate or longer repayment period, and using it to pay off your existing loans.
The advantages of debt consolidation include lower monthly repayments, preserving your good credit rating and easier financial management. However, any situation that requires taking out a loan should be approached with caution, so make sure that before you proceed you are fully aware of the risks involved. For example, if you have a poor credit rating from getting into debt in the past, a lender might insist on you securing the debt consolidation loan against your property because this ensures that they will be able to reclaim their money if you are unable to pay back the loan. If you would like to speak to a qualified adviser about whether debt consolidation is right for you, simply fill out our short form and we will connect you to an adviser from the SimplyFinance network.