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Debt Consolidation

If you have several different debts, such as credit cards, loans, overdrafts etc, that you are struggling to repay each month then debt consolidation is a debt solution which could make your life easier.

What is Debt Consolidation?

Debt Consolidation is the process of taking your unsecured debts and consolidating them into one monthly payment by obtaining a loan, leaving you with only one monthly bill to pay. For example if you have credit cards, loans and overdrafts etc, instead of paying of 3 or 4 bills each month you would pay them off with the loan and just make the one loan payment each month. You can use a personal unsecured loan or a secured loan to pay of the debts in full. This method of debt consolidation means that you only concentrate on paying back the one loan payment per month, leaving your payments much more manageable.

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Debt Consolidation Example

Debt Consolidation

Lets say you have debts consisting of credit cards, loans and an overdraft. The total of these debts comes to approx €10,000. You have many different monthly debt repayments of varying amounts, which is hard to manage and you feel like you are getting nowhere with paying off the debt. You are also struggling with meeting the monthly repayments because of the varied levels of interest..

You manage to obtain an unsecured loan of €10,000 with a low fixed interest rate. You use this loan to pay off all of your debts. The interest rate on the loan is much lower than all of the combined interest on your multiple debts so this allows more money to go towards the actual repayment of the debt. You have a set period for the term of the loan and your monthly repayment is much lower and more manageable than your monthly debt repayments before the loan.

Pros of Debt Consolidation

 It can be easier to manage

 You will have just 1 affordable monthly payment

 You will know exactly when you will be debt free

 Reduce high interest rates on your credit cards, store cards, overdrafts or loans.

cons of Debt Consolidation

 You may be subject to fees for arranging the loan

 If your credit rating is poor, you might not get a good interest rate on your loan

 If you obtain a secured loan to pay your debts off, and you miss payments on the loan, your home could be at risk.

 If you don't get a fixed rate on your loan, the interest could vary or increase during the loan term.

 Don't be fooled into thinking that you have cleared your debts. You have just shifted it to another form.

Should I consolidate my debt?

Knowing whether or not to consolidate debt is not a decision that should be entered into lightly. It might be right for your circumstances, but in some cases a different debt solution might be better. There are certain criteria you will need to meet in order to qualify for Debt Consolidation. It will also depend on the amount of creditors and outgoing bills you have as well as your overall debt amount. Some of the criteria that would qualify you for debt consolidation are as follows.

  • If you are having difficulty staying of top of your debts and making your debt payments to lots of different creditors.
  • You are confused with the varied amounts and levels of interest on all your debts and you would like one overall rate that is easy to understand.
  • You want to reduce your outgoing monthly bills.
  • You want to find an easier way to pay off all your debts and become debt free.
  • You have a relatively good credit rating where you can get a good rate of interest on your loan and a loan amount that will cover all of your current unsecured debts..

nb. *The suitability of consolidation also depends on the level of your debts. Sometimes there are better options for you such as debt management or a DSA (Debt Settlement Arrangement)..

Debt Consolidation FAQs

Below is a list of our most frequently asked questions relating to Debt Consolidation. If you have a question that isn't answered below click here and ask us a question online.

This depends on exactly how much money you are paying and how long you want to repay the loan borrowed. It also depends on what interest rate you agree on your loan and whether or not it is fixed or variable rate. Reductions in monthly payments can be highly reduced with the right consolidation loan.

There are a variety of factors which dictate how much you can borrow on a loan. Whilst your income and, for secured loans, the equity available in your property are key, the main one is that you can afford to make the monthly repayments back into the loan. The lender must be confident that you can repay the debt.

This is usually up to you and will depend on how much you feel you can afford to pay each month. For example, you might want lower repayments spread out over a longer period of time if you are trying to get on top of your finances each month. Most loans are usually available for anything from 3 years up to 25 years, though some loans can be spread over a longer period of time, depending on your circumstances.

Certainly. Consolidating your existing debt allows you to free up money for other things. You can borow extra for other things, such as a new car or home improvements. The choice is yours. Just remember though, the loan is a debt and you will need to keep up repayments so do not over-borrow.

If you have illness or lose your job and cannot keep up repayments on your loan, this can cause some problems, the severity of which depends on whether your loan is secured or unsecured. You must consider this if you are applying for a loan. Some companies will arrange accident, sickness and unemployment cover if you want the added peace of mind this brings. Life assurance is also advisable. We would strongly advise that you consider very carefully before taking cover as it can be very costly to do so as some companies charge too much for this.

The answer to this question depends on the type of loan you have taken out and how much equity is in your home. If it is an unsecured loan, then yes, you may sell your home. If it is a secured loan against your home, then, providing you have equity in your home, you can use the proceeds of the sale to pay the outstanding balance of the loan. That is providing you are not subject to hefty early settlement charges, detailed in the loan agreement. Another option for a secured loan is to transfer the loan to the new property. This option may carry a fee and not all lenders will allow this.

Are you like the many thousands of people suffering from debt in Ireland?

Do you want to lower your monthly creditor payments and start living again?

Do you want to stop your creditors calling and harassing you?

Do you want a totally FREE & CONFIDENTIAL debt solution now?

We, at McCambridge Duffy can help. Call 01 539 57 90 now or get in touch by filling in the form on this page.

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