How does debt consolidation work?

Debt consolidation works by taking out a new loan or remortgage that is large enough to pay off all of your existing unsecured debts in one go.

Debt consolidation works to improve your financial circumstances and make your life easier. If you are juggling multiple debts on credit cards, store cards, loans and Hire Purchase (HP) agreements, debt consolidation could be the ideal solution.

Debt consolidation allows you to pay your debts back over a longer period of time. Paying back your debts more slowly, will make your new monthly payment lower than the combined total of the payments you were making before. With this the level of disposable income you have each month will be increased, however debt consolidation means you will owe money for longer, so will be paying interest for longer, so in the long term you will be paying back more.

Easy, manageable debt repayments

Consolidating your debts can make your life easier, your finances will be made simpler as you will only have to make one monthly payment and you will only be dealing with one company.  With a debt consolidation loan you will no longer have multiple debts that can be difficult to manage. By dealing with one company and paying out less each month, you will no longer have the stress and worry of having to deal with difficult phone calls and letters from multiple creditors.

Debt consolidation doesn't require you to be a homeowner or even if you are a homeowner, you won't be required to borrow against your property if you don't want to. However, as with other types of loans, an unsecured debt consolidation loan will often have a higher interest rate than that of a secured consolidation loan.

How a debt consolidation loan will help you

A debt consolidation loan works to get you back on the path to a financially health future. As part of debtsmart, one of our Financial Solutions Advisors will be employed on your behalf and will conduct a comprehensive assessment of your financial circumstances. Your Financial Solutions Advisor will look at your monthly income and the essential expenditure you are required to make each month, including food, clothing, gas, electricity and water bills, and also costs involved with travelling to and from your place of work. Once your Financial Solutions Advisor has assessed your financial circumstances, they will approach your creditors to negotiate the best possible interest and repayment terms for you, and also request that any late payment charges you have received are either frozen or reduced. Once this is done they can research the best value debt consolidation loan to suit your circumstances from one of our specialist panel of lenders.

Taking out a debt consolidation loan will see you back on the path to a financially healthy future and will consolidate your debts into one single affordable monthly payment. However to do this you will pay your debts back over a longer period of time, which in the long term will mean you end up paying more money out.