Product Description
A debt consolidation loan is used to pay off multiple loans or credit card balances that are already in your name. Typically this type of loan will lower your monthly payment and provide lower interest rates but it will also extend your repayment schedule. You pay the loan with one monthly payment rather than multiple payments but you will often have to pay for a number of additional years. Debt consolidation loans can be secured or unsecured loans, but more often than not the loan will need collateral.

Main Players
A number of providers are willing to lend larger than average amounts for debt consolidation. The top names at present include Blackhorse Personal Finance, Alliance & Leicester and Sainsbury’s Personal Finance however you do need to have a good or fairly good credit profile to be accepted. Options also exist for those with a poor credit history though and these include Ocean Finance and Norton Finance – both of which will want to secure the consolidation loan on your home.

Pros of Debt Consolidation Loans

• You get to pay one lower monthly payment instead of several payments to different companies.
• Lower interest rates may apply, depending on the size of the loan.
• You only have one creditor to deal with in the event of problems.

Cons of Debt Consolidation Loans

• The loan generally has to be paid for a longer length of time and so you will end up paying more in the long run.
• Should you default on the loan you will end up in more debt than you started with.
• Collateral is required in most cases and this is often in the form of your property. Non-payment of the loan can therefore result in you losing your home.

Things to Consider When Choosing a Provider
Reputation is imperative when choosing a debt consolidation loan provider. You do not want to just pick a name from the internet and hope they will give you a great deal. The thing to remember with debt consolidation is that often when a deal sounds too good to be true, it is.

Major banks are not always willing to come through with a debt consolidation loan and so you will need to research the other available options. Most companies tend to purchase your existing loans at a discounted rate from the current creditors and then create one loan that you are responsible for. They will set the interest rate, terms, and loan amount. This means you want to find a debt consolidation company that has a good interest rate as well as set up fees.

Along with the purchasing of the debts there is often a fee for the advice, services, and subsequent buying of the outstanding loans. The fees will vary from company to company so examine the terms and conditions of the contract before signing with a provider. This way you are able to choose a company you can trust and that will not cost you more money than is warranted.

BUYability Summary
A debt consolidation loan can help to solve your financial troubles by lowering your monthly payments and interests. It will however also lengthen the amount of time that you have debts for and this needs to be considered as well. It is best to seek debt consolidation loans before you are in arrears or a repossession circumstance. The higher your credit score is the easier it is to find a workable solution.