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Debt Consolidation Advantages & Disadvantages

It is important that you take into account all the advantages and disadvantages of debt consolidation. Below are a few examples. If you do not find the answers you are looking for below, then please call us today, freephone, for a more detailed insight and information on any queries that you might have, on 0800 048 1781.

Advantages of Debt Consolidation

If you are suitable for Debt Consolidation then it can offer you some real advantages. It is best suited to those who have equity in their home and can afford to commit to making the monthly payment to a new loan.

Additional advantages of debt consolidation include:

  • Reduced monthly payment.
  • A debt consolidation loan is often at a much lower interest rate than your unsecured debts, as you will be securing the debt against your home.
  • No more hassle from multiple creditors as they will have all been paid off with your Debt Consolidation Loan.
  • Combine all your outgoings into one, which makes it easier to manage your finances.
  • If you find it a struggle to make payments to your secured debts, this should be alleviated as you are only making one reduced payment to cover all your debt.
  • Longer repayment period typicaly means lower monthly payments.
  • Consolidation of your debt.
  • As long as you don’t miss any monthly payments, it will help to rebuild your credit rating.

Disadvantages of Debt Consolidation

Although debt consolidation can offer you a range of advantages, it is always important that you are aware of any disadvantages that may occur. The main disadvantage of debt consolidation is that the loan will be secured against your home, so it is vital that you can fully commit to making the payment.

Additional disadvantages of debt consolidation include:

  • A longer repayment term.
  • New terms and conditions may alter any agreements that you had with your unsecured creditors.
  • You may not be able to roll all your debt into the new loan, meaning that you will still have unsecured creditor commitments to make.
  • It can sometimes be difficult to get accepted for a debt consolidation loan if you have a poor credit history.
  • Risk of getting further into debt if you continue to spend on the cards that you consolidated.

We recommend that you always seek expert advice before you commit to any financial plan. For personalised debt consolidation advice, please call our specialist debt advisors on freephone 0800 048 3674.


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