Key points relating to cheap consolidation loans

by Ceri Harris06.01.2014

Cheap consolidation loans may allow you to overhaul your financial situation and reduce your outgoing costs.

Here are a few pointers that we hope you’ll find useful:

  • consolidation loans work on the basis that it is typically more cost effective to borrow larger sums than smaller;
  • if you take out a larger loan and use it to pay off several smaller debts, you may find that your monthly outgoings in debt repayment are significantly reduced;
  • for this to be truly effective, you will need to be sure that the cost of the larger loan, in interest rate terms, is lower than the costs of the smaller loans you are replacing with it;
  • you may also find that only having one single financing source to manage, makes your life far more simple than when you are trying to handle several individual debts. Being overwhelmed with debt can be devastating emotionally, so clearing all your smaller debts and having just one amount to pay can help you feel more in control;
  • if you are engaging in debt consolidation and this includes paying off credit card bills, you may need to be careful to avoid simply running-up again the same credit cards once you have paid them off. Cutting them up could be a solution!
  • looking for cheap consolidation loans is understandable but remember that ultimately it is the totality of your funding requirement that is important and matching that against a number of options may be a better approach to selecting a solution than simply searching for the cheapest loan (as what is cheap for one person might not prove to be cheap for you);
  • funding a debt consolidation plan is typically based around secured loans - in other words, the providers of the finance may require the provision of security in the form of a charge over one of your assets (depending upon the sum you are looking to borrow, typically your house);
  • your asset is completely safe, providing you keep up loan repayments in accordance with the legal contract in place between you and the provider of your funds;
  • if you do encounter difficulties with repaying the amount, providers typically will seek to help you in any way they can - forcing the sale of your asset to recover their money is typically an option of absolute last resort;
  • your home may be at risk if you fail to maintain the repayments of any loan secured against it – including cheap consolidation loans.