When Is A Consolidation Loan Not A Good Idea?
By Luke Ashworth
Consolidation
loans have been highly publicised over the last year or so. Seen as the number one way to end your debt worries, thousands of people are applying for them each year. But are they really the best way to end all of your debt worries? Well, technically no.
Why Consolidation Loans Are Not Always A Good Idea
If you take on a
consolidation loan thinking that it will get you out of debt, you are seriously mistaken. Yes, it will pay off your existing debts, but it is replacing them with another one. Many people do not take that into account and they just see the advertisements that make these loans look ideal. They can be helpful, there is no denying that, but they do not get you out of debt. In fact if anything, they get you into more debt.
The advantages of a consolidation are that they help you to feel less trapped. They give you a little more financial freedom and they help to give you part of your life back. However, it is still debt and because the repayments are usually lower, it means that the term of the is actually longer than your others were. So, you will be in debt a lot longer than you originally planned and that can affect all kinds of decisions.
Things, such as a mortgage, may be a lot harder to achieve if you do have a long-term loan. So you need to consider that before you rush out and apply for one.
On the upside, however, if you already own your own home, a consolidation may be an option for you. After all, you do not need to think about getting a mortgage as you already have one. You may even be able to get a better priced consolidation as you are a homeowner and you can get it secured on your home. Tenants tend to get higher priced interest rates because the is not guaranteed to be paid back. So that is just one advantage.
Though consolidation loans do need to be given some thought, they are not quick fixes and they will not rid you of your debt problems. On the other
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hand, they can really help you out if you have done your research and you do know what you are letting yourself in for. You just need to research various companies in order to see which ones have the best interest rates. It is all about comparing and with hundreds of consolidation companies within the UK, you are bound to find one to suit you.
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This article was written by Derek Rogers on 1st February 2007. The views in this article represent those of the author and not those of Netbasic Limited.
WARNING: THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT. LOANS ARE SECURED ON YOUR HOME. 9.9% APR TYPICAL VARIABLE.
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Luke Ashworth is the founder of Accepted.co.uk which helps homeowners search for loans via the website www.accepted.co.uk
