If the idea of debt consolidation both appeals to you and confuses you at the same time, research suggests you’re far from in the minority. The truth is, pretty much every modern consumer lives with some form of debt in their lives – mortgages, credit cards, personal loans, hire-purchase and so on. Getting by 100% debt-free just isn’t a realistic possibility for most.

That said, there’s a big difference between manageable, sensible debt and the kind of debt that sends you into a downward spiral that’s difficult to break.

How Debt Consolidation Loans Work

As far as the basics go, debt consolidation loans are quite simple. After all, they’re designed to simplify things – not make them more complicated.

In a working example – say an individual has half a dozen different debts with different service providers. Three credit cards, two personal loans and an overdraft. Each of these has its own interest charges and fee structures, meaning six monthly payments inclusive of all the fees. When you take out a consolidation loan, it is used to pay off all (or some) of these balances in full. Then, instead of paying six bills and six rates of interest, you instead pay one bill per month at one rate of interest. If these six bills were costing the borrowers a total of £300 per month at a combined average interest rate of 10%, a consolidation loan might be able to drop this to £50 at 5%.

Of course, the consolidation loan will take much longer to pay off, but will also amount to massive savings – immediately and for the long-term.

Secured and Unsecured Consolidation Loans

Consolidation loans are available for business borrowers as well as everyday domestic customers. It’s common for businesses – especially smaller and newer enterprises – to find themselves juggling multiple debts and interest rates as they progress. There are many references online to find the best rates like this page for bridging loan rates that are lowest compared to most lenders. Once again, the right consolidation loan at the right time could make an incredible difference, in terms of both simplicity and savings.

But what’s important to acknowledge is that there are many different types of consolidation loans.

For example, if you have the assets or collateral required, you could use low-cost, high-flexibility secured loans to consolidate all your debts. If you have no security to put up, you could go for a purpose-made consolidation loan. In the case of the latter however, even applying for such a loan in the first place can leave a mark on your credit report. Plus there’s the inevitability of higher interest rates and stricter lending criteria attached to unsecured consolidation loans.

What makes the right choice for you will come down to your own unique circumstances. In all instances therefore, considering all options and proceeding in accordance with independent expert advice really is the only way to go. – https://www.bridgingloans.co.uk

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