A Loan is an agreement to repay a sum borrowed plus interest over a period of time (the 'term').
Debt Consolidation Loans normally enable you to reduce repayments by borrowing the amount owed through one new debt. It is often possible to reduce interest charges or monthly outgoings by doing this. Specialist companies will lend you the money regardless of any bad credit rating you may have.
A consolidation loan amalgamates all your unsecured debts and secures them on your property. This should not be taken lightly, because you have significantly increased your risk. If you default, your house is at risk. Therefore, always seek expert financial advice and ensure that the loan is affordable.
A consolidation loan is only suitable if you have a lower level of debt and if it will reduce your total outgoings. For larger debts it is more likely to worsen your situation. A debt consolidation loan may also increase your total debt repayment amount.
Always check the terms of any agreement carefully if there's a chance you may want to repay early. Many lenders charge you most of the interest you would have paid if you had kept the loan for the full term.
You may be offered payment protection insurance with your loan. This is insurance that pays off the loan if you get into difficulties and can't pay. If you do decide to take it, remember to read the small print to check what you're covered for.
Debt Consolidation Explained contains general information only. We strongly advise you to seek qualified professional advice before taking any action.