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If you have little knowledge of finance the prospect of finding the debt solution that is best for you can feel very daunting. The last thing you want to do is get yourself into a situation where you end up paying more money over a longer period of time and the maths involved in working out the best option is a bit terrifying!
Consolidation loans can be taken out when you have more than one creditor that you need to pay. Instead of paying each creditor separately your consolidation loan will cover all of these payments in one go.
For example if you have a collection of store cards and credit cards that you are paying off each month wouldn’t it be just lovely if you could cover all of these in one, lower monthly payment? If your answer is ‘YES’ then a consolidation loan may be the ideal loan for you.
Making just one payment a month can make your finances a lot easier to manage and having just a single, regular, fixed cost being taken from your account each month will make budgeting far less stressful. Consolidation loans also often have lower interest rates than other financial products meaning that you could end up paying less money in the long run.
Sounds great, doesn’t it? However, as with everything, there are a few aspects which may mean that consolidation loans are the wrong choice for you which should be taken into account before any decisions are made.
Firstly, ensure that you have worked out the total amount of money, including interest, that you are paying out to creditors each month. These loans work best when all payments are being consolidated so make sure that you include everyone to avoid any surprises down the line. Once you have worked this out you can look into which consolidation loan will give you the best deal. Using a loan comparison site such as www.Best4Loans.com will really help you out at this stage.
One of the most important things to remember is to be honest about how much you can afford to pay out each month. A consolidation loan will only help you to pay less if you make your monthly payments on time and in full. Take into account household budgeting such as rent, bills and food to make sure that you do not pledge to give away more than you can afford. This will prevent you from ending up paying a higher interest rate over a longer period of time!
Another important factor to take into consideration is that some lenders require you to be a homeowner so that they can secure your consolidation loan against your property. This point needs to be given a great amount of thought, just to make sure that it is the right option for you, as if you get into the habit of continually missing repayments it could result in your property being repossessed.
There are a couple of little temptations which you must avoid if you decide to take out a consolidation loan. Firstly, only borrow what you need to cover your debts. It may seem like a good idea to get a bit more money out of it but in the end this is only going to result in higher costs to you. You also have to make sure that you are not tempted to borrow money from any other sources due to already being in debt. Cutting up your store and credit cards would be best. Even though it might be painful to see them go! Also, cancel any overdrafts that you have to help you to avoid spending money that you don’t have.
If you think that the above points sound reasonable then you may have found your ideal debt solution. Hooray! Now to call those helpful people at www.Best4Loans.com on 0844 344 5177 or complete the short form for a no obligation phone call at https://www.best4loans.co.uk/consolidation/consolidation-loans.aspx.
By Sasha Davison
17th December 2013
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