Debt Consolidation could help you re-organise your debts into one affordable payment each month. However, you might have difficulty obtaining an affordable loan if you are already struggling with existing debt repayments, have missed payments, or if your credit rating is impacted in any way.
If you are thinking about consolidating your debts, but are having difficulty obtaining a Debt Consolidation loan, then we might be able to help with an alternative option. We offer formal debt solutions that could help you address your financial difficulties with affordable monthly repayments. We can help identify if any of these solutions are suitable for you.
Contact us to find out what options are available for dealing with your debts. All advice is free, confidential and without obligation.
Debt Consolidation is the process of taking your unsecured debts and consolidating them into one monthly payment by means of obtaining a loan, leaving you with only one monthly bill to pay. For example, if you have credit cards, loans and overdrafts that you are finding difficult to manage, you could pay off the debts with a loan and make just one monthly payment instead of paying of 3 or 4 bills each month. You can use a personal unsecured loan or a secured loan (usually secured against an asset, such as your home) to pay off the debts in full.
In a loan you are replacing several forms of credit with another form of credit. You need to make sure you will qualify for a loan and also consider if you can afford the loan repayments each month for the duration of the loan. Shop around for the best deals available from the high street or online lenders. If you have a poor credit rating, you might not be able to obtain a loan, or you may only qualify for a loan with very high interest, which could cause problems with affordability. If this is the case, contact us to get advice on how you can address your debts.
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 becoming hard to manage. You feel like you are getting nowhere with paying off the debt and you are starting to struggle 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 over a set number of years. You use this loan to pay off all of the current 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. Because you have a set period for the term of the loan and your monthly repayment is much lower and more manageable than your previous combined monthly debt repayments, you are able to manage the situation much more effectively. You also know an exact date of when you will have finished paying the loan in full.
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.
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.
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.
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)..
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.
There are several Debt Solutions available in Ireland that can help you address your debts. might offer an alternative way of addressing your debts, instead of consolidation.
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