If you are looking at debt consolidation, then you are experiencing some problems with loans or credit cards that you currently have. This indicates to many companies that you might not be the best risk for paying back the money lent, and this can often lead to higher rates of interested offered.
To reduce any potential highs in the interest rate it is better to look for consolidation before you run into problems, not waiting until you have missed or late payment marks on your credit file.
Finding the right debt consolidation
It will depend on your circumstances as to the debt consolidation option that is the right one for you. Often it will depend on your ability to pay the debt and the amount of money that you owe.
If the debt is on a credit card, one option open to you is to transfer the balance to a 0% transfer deal or a low-interest payment option. This might confuse some people but often a 0% credit card rate offer has a transfer fee. This fee, added to your debt, can increase the amount that you owe, more than a low-interest option transfer, which has no transfer fee involved.
If you are considering transferring your credit card debt into a loan, then you need to get all the data before you apply. What the rate is will depend on your circumstances, but often some companies can offer an indication as to the likely interest rate and this can help decide if it is a better option; it needs to be cheaper than the rate you are currently paying to have any benefit. The length of time you have the loan for is important; it gives you a clear indication when the loan will end. However, the longer that you have the loan, the lower the payments but the more interest you will be paying on the debt.
Before you commit to consolidation loan, some companies have criteria that you might not be aware of; some stipulate that you are unable to take out more credit until the loan is paid and sometimes that includes the credit cards that you are paying off.
This prevents you going further into debt; it can be a great way to get your budget back on track, but for others it is a restriction too far.
How to move forward
If you have required a debt consolidation loan, then it means you are not managing your money. This might seem a little harsh, but you need to balance the money coming in with the money going out. If you spend more than you have available, then you are quickly going to run into problems that are not easy to solve. As a worst case scenario you can be declared bankrupt and this will prevent you from gaining credit for a minimum of seven years, and you can lose your home too.
There is hope, if you are unsure how to create a budget there are sites on the internet that offer free guidance to building a budget; you can look at some of the other articles published on this site. Alternatively, you can ask for help from charities like the Citizens Advice Bureau.
Taking back control of your finances will make your life less stressful.