Debt Consolidation

Debt consolidation basically means that you are combining your debts into one account so that you pay one bill as opposed to several. For example, a Debt Management Plan is an excellent way to consolidate your debts because you only pay one amount every month which is then distributed between your creditors.

At Baines & Ernst, we could negotiate a lower repayment rate with your creditors – ensuring repayments are as affordable as possible.

If you choose to consolidate your debts, you must remember that you could extend the time in which you repay your debts, which could increase the total amount owed if interest rates and charges are not frozen. However, in the majority of cases Baines & Ernst can freeze interest and charges.

Credit card debt consolidation

Credit card consolidation basically means transferring the balance from one card to another card with low rates or 0% interest. This type of solution can make repaying the balance easier, however you will need ensure you to take a very disciplined approach to debt repayments, as the lure of credit card spending can be difficult to resist.

It’s not uncommon for debts to actually increase when people try to consolidate debts via balance transfers because they continue to spend on credit cards, often spreading purchases across a number of cards.

Your credit rating could also be affected as a result of transferring balances.

Two key areas people fail to explore when considering credit card consolidation:

• How long the promotional rates are available for
• What the interest rates / APR will be when the promotional rate ends

If your credit card debts are spiralling out of control, we recommend you choose a more effective debt management solution.

Unsecured Loan Consolidation

A loan is another way to pay off multiple debts so that you are left with just one unsecured debt to repay. One of the advantages of combining small debts into one larger loan is that it typically means a lower interest rate overall.

As with credit card debt consolidation, you need a good enough credit rating to qualify for the consolidation loan. Personal loans also have fixed repayment rates, so you must be able to fit the repayments into your budget.

If you have a damaged credit rating but believe a small loan could help you repay your debts, we recommend that you contact Evolution Money for more information.

Remortgaging For Debt Consolidation

Releasing equity from your property through re-mortgaging is another way to clear your personal debts. You might be able to do this with your existing lender, or you might have to switch to another mortgage lender for the best rate.

However, this type of lending could place you at a higher risk of negative equity if the value in your home drops. If you cannot keep up the higher mortgage repayments, you could be at risk of repossession.

Secured loan

You could also look into a secured loan to consolidate your debts. A secured loan is a loan secured against a property or asset. It can be an effective way to consolidate your debts; however, if you cannot keep up the repayments on a secure loan, you could face serious repercussions including court action. Therefore, we recommend that you explore other possibilities in the first instance.

For impartial debt advice, speak to the experts at Baines & Ernst.