Avoid Debt Disaster Through Debt Consolidation
Weíve had some rather more cheery economic forecasts recently but the latest figures on the state of the national debt couldnít be more bleak.
According to the Office for National Statistics weíre now racking up debt at a rate of over ?,000 a second. Even Victoria Beckham on a shopping trip at Christmas might struggle to match that rate of expenditure. And she can afford it.
Itís more than a little worrying, but for some of us the feeling of sliding into a more of debt might be all too familiar. Many of us have even been in the position of struggling with the interest payments alone.
Alistair Darling could sympathise with that. According to some analysts the Government currently has to pay more than ? billion a year just on the interest thatís built up ñ roughly ?? for everyone in the country.
With debts approaching ?? billion the Government will probably struggle to find a debt consolidation loan. For those of us with lesser but equally pressing financial concerns, debt consolidation could be the ideal start. MoneyExpert.com gives some top tips.
What is Debt Consolidation?
Debt consolidation has had a pretty bad press, and some might argue thatís with good reason. Many borrowers have simply used it as a means to keep fuelling their borrowing habit without actually tackling their debts head on.
Ultimately, though, debt consolidation, which sees you move the money you owe a host of different lenders into one, manageable debt can be a good first step to re-organising your finances and getting back on track.
What Are The Benefits Of Debt Consolidation?
First and foremost, consolidating your debts into one repayment considerably reduces the difficulty of managing all your borrowing. Ensuring that your credit card, loan, and store card payments are all made on time, as well as checking that your rent or mortgage payments can be made, can be a serious task.
By taking out one loan to clear those debts and then making a single payment every month youíll find it far easier to stay on top of how much you owe and to whom.
Lower Interest With Debt Consolidation
Perhaps more important than offering a means to organise your re-payments, youíre likely to find that consolidating your debts will leave you with less interest to pay back. In general, interest rates are higher the less money you borrow, and so rolling all your debts into one loan will, more often than not, leave you paying a better rate.
A prime example is for those chronically overdrawn on their current accounts. The average interest rate for an authorised overdraft is just under 16%, and for unauthorised overdrafts it is even higher at just under 19%. If you were to clear that debt, along with others, using a consolidation loan you could find a far better rate. ASDA, Sainsburyís, Nationwide, and Alliance & Leicester all offer personal loans below 8%.
What Should You Do Next?
Debt consolidation can be a good option but it is only the first step in getting your finances back on track. It shouldnít be used as a means to prolong the inevitable and certainly shouldnít be used simply to fuel more borrowing. Once youíve consolidated your borrowing youíll need to set up a repayment plan straight away and make sure you stick to it.
Compare Debt Management, IVA and Debt Consolidation Solutions.