FAQs Debt Consolidation

Anyone who is considering debt consolidation will likely have a few questions. Here are the most frequently asked questions about this type of debt solution.

So what is Debt Consolidation?

Debt consolidation is based on a simple idea. It involves getting a loan to cover all your debts so that afterwards you only have one loan to pay back. This not only means that you now only have to deal with one creditor but it should also mean that you will be paying a lot less interest. Dealing with just one loan is a lot easier to manage then dealing with many debts. Most debt consolidation firms will understand your needs and so arrange for a debt repayment scheme that you can afford.

Is Debt Consolidation the Best Option for Everyone?

There is no one option that is going to be right for everyone when it comes to dealing with debt. There is a fortune spent on advertising the benefits of debt consolidation but it really isn’t any type of magic bullet. It can work for some people but there are other people who might find themselves in a worse situation because of it. It is important to have a look at your other options first of all.

Are All Debt Consolidation Services the Same?

There are not all the same. Some will be non-profit organisations that are just there to help people. These organisations can be a bit overstretched but they do a great job most of the time. There are also profit-making debt consolidation firms where they charge for their profits but offer a good service for this. The benefit of choosing such a paid service is that they are less overstretched than the free services. There are also paid services where the only concern is making money off people’s misery. These outfits tend to get closed down over time, but they can stay in business for years before this happens. Always be sure that you are not dealing with one of these feckless debt consolidation firms.

Are There Risks with Debt Consolidation?

Yes there are risks with this type of debt solution. You will often be expected to put up some type of collateral – often your home. If you are unable to make the payments on your debt consolidation loan then you could lose your house. This is why you should never agree to any debt consolidation loan unless you are 100% that you will be able to make the repayments. These firms generally don’t want to take your home away from you but they will if they feel it is the only way to get back their money.

Is Individual Voluntary Agreements (IVA) a Better Option than Debt Consolidation?

The great benefit with an IVA is that it will usually mean that you will pay back a lot less than what you owe. The downside is that it can affect your ability to get credit in the future. It is best to try other solutions before considering the more drastic ones like IVA and bankruptcy.