Advantages and Disadvantages of Debt Consolidation

It is important that you take into account all the advantages and disadvantages of debt consolidation. Below are a few examples but for more detailed information and to answer any queries that you might have, please call us today on 0808 131 0037.

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 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 free debt consolidation advice, please call our specialist debt advisors on freephone 0808 131 0037 or fill in the Quick Enquiry form so we can call you back.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. IF YOU ARE THINKING OF CONSOLIDATING EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERM OF DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY.

For mortgages and re-mortgages the overall cost for comparison is 8.5% APR variable and for secured loans 14.5% APR variable. The actual rate will depend upon your circumstances. Ask for a personalised illustration. A broker fee may be payable on completion, and will depend on your circumstances. For mortgages and re-mortgages this fee is typically between 0% and 3% of the gross mortgage amount, subject to a minimum of £2,495 and a maximum of £3,995. For secured loans, the fee is typically between 0% and 10% of the loan value.



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DebtConsolidation.co.uk is a trading name of Ask Finance Ltd which is registered in England and Wales (company number 4229724), Jackson House, Sibson Rd, Sale, Manchester, M33 7RR. Ask Finance is licensed under the 1974 consumer credit act to carry on the business of consumer credit, consumer brokerage, debt adjusting and debt counselling. Consumer Credit License No: 507130. Ask Finance is authorised and regulated by the Financial Services Authority (FSA) - FSA No: 300490 - for the provision of mortgage advice and arranging insurance.

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