It can be easy for your debts to spiral out of hand when you’re making several payments a month to providers which in some cases may, ultimately, only cover the cost of the interest. In this situation, some people find a debt consolidation loan the best solution.
The concept of a debt consolidation loan is relatively easy to understand. A consolidation loan allows you to pay off any outstanding debts and reduce your monthly repayments into a single monthly outgoing.
An Advantage of Debt Consolidation Loans
Although this doesn’t help to decrease your debts, it can help you by putting your existing credit into one place and can be repaid in smaller amounts over a longer term which can reduce your monthly outgoings, ultimately making your monthly repayments more manageable. Debt consolidation loans, like those offered by Nemo Personal Finance, are particularly useful for borrowers who are making multiple repayments to lenders each month, and are finding it difficult to afford to repay more than the minimum sum each month. Remember a Nemo loan is secured against your home so you need to make sure you can afford the repayments.
A Disadvantage of Debt Consolidation Loans
Often, consolidation loans are offered as second charge mortgage which may increase the amount you pay back overall and extend the repayment period of your debts. The total amount of interest you pay on the consolidation loan may be more than the total amount of interest that you repay on the credit you are settling and may cost more over the course of the loan, so this is something you need to consider before proceeding.
When deciding whether a consolidation loan could help you, it’s important to take the time to consider the factors above, and to assess how they relate to your individual situation before making any decisions.