At first glance the option of taking out  a loan to consolidate other debt may look very appealing.

The monthly payments of the consolidation loan are often are lower than the sum of the payments of the previous debts. In addition, you now only have a single payment to make and the interest rate is often lover than the rates on say the credit card balances you have consolidated.

However, debt consolidation is not right for everyone. Some important factors to consider before going ahead with consolidation are listed below

Where to start

• Choose the solution – Use the “Which way should I turn” form to get your FREE DEBT REPORT
• Ask the experts – use the Beat My Debt Forum
• Call us now – speak to one of our advisors in confidence to see if consolidation is right for you.

Take the first step to beating your debt NOW – Call us free on 0800 077 6180

Remember you will pay interest on the loan

You need to be aware that as soon as you take a consolidation loan, you will owe more than the total value of the debts you have consolidated. This is because the bank will add interest to the consolidation loan. For example, if you borrow £10,000 over 5 years at approx. 8% APR, you will end up repaying approx. £12,350 back at the end of the 5 year period.

You must change your spending habits and cut up your cards

If you decide to use consolidation as a means of resolving a debt problem, you must ensure that you will change your spending habits i.e.the reason you got into debt in the first place.

If you continue to spend beyond your means, then it will not be long before you are using your credit cards again and they start reaching their limits. But now you also have your consolidation loan repayments to make as well. Before you take a consolidation loan, make sure that you understand your personal income and expenditure to see where you can make savings.

The best advice is once you have consolidated your Credit Cards, cut them up and do not continue to use them.

Check you can afford the loan

If you are facing financial difficulty, it may be extremely tempting to take a consolidation loan simply because the monthly loan repayments are significantly less than the amounts you are paying to the debts you want to consolidate. However, before you take the loan, make sure you can afford to repay it from your disposable income by analysing your personal income and expenditure.

Many people get even deeper into financial difficulty by taking consolidation loans which they actually cannot afford to repay. If this is the case, then immediately on taking the loan, they begin robbing Peter to pay Paul and soon debts start to mount up once again.