Debt Consolidation Loans

The first reaction by many people when they realise they have a debt problem is to consider debt consolidation via a larger loan to be the answer. This is often a very dangerous strategy as debt consolidation loans whilst, on the face of things, may appear attractive they often serve to simply make a debt problem worse as debt consolidation loans effectively will increase the overal level of debt that is outstanding.

Debt Consolidation Loans - The Dangers

Debt consolidation loans are heavily advertised in the media by loan companies. Often debt consolidation loan companies will advertise the fact the people with  a poor credit history can still apply for their debt consolidation loan stating that even if that person has court judgements they may still qualify for the loan, Such companies may typically charge a higher interest rate when arranging debt consolidation loans particularly if the individual applying for the loan has a bad credit history or other debt repayment discrepancies against their name.

It is always important to understand what interest rates are being charged by the loan provider and to have a clear knowledge as to just how much the total amount of the debt consolidation loan will be if you decide to apply for a loan to consolidate your debts. The Debt Advice Team are contacted regularly by people in Ireland that have opted to take out a debt consolidation loan only to realise that the loan has not solved their debt problems and are now in a situation were they can't afford to pay the debt consolidation loan at the agreed rate and now owe more money than before they took out the loan. This is a very common mistake that many people with good intentions unwittingly make.

Are Debt Consolidation Loans Ever A Good Idea ?

Although the Debt Advice Team at Hutcheon Solicitors generally do not recommend debt consolidation loans as a positive debt solution as generally speaking a person can not 'borrow themselves out of debt', sometimes debt consolidation loans can be used as a effective tool as part of a wider debt management strategy.

Debt consolidation loans can sometimes be used effectively to pay of more expensive forms of credit, such as credit cards, or store cards, providing the APR of the debt consolidation loan is significantly lower than the credit facilities a person is looking to pay off. It is worth remembering though that although the debt consolidation loan may be used to pay off credit card debts for example the actual outstanding amount of the debt consolidation loan is stil likely to be higher then the total amount outstanding on the credit cards at that point in time when the loan was taken out.

The benefit of using a debt consolidation loan in this scenario is likely to be the individuals ability to reduce monthly debt servicing costs and free up some spare cash each month that could be used to pay manage other bills or debts that the person may have. Again, this will only be the case if the debt consolidation loan repayments are significantly lower than the debt servicing payments beforehand. The key point here is to look at the numbers involved very carefully before committing to taking out a debt consolidation loan.

Debt Consolidation Loans and the Credit Crunch

Recently, many people have found that they have been refused a debt consolidation loan by the loan provider when they have applied. The impact of the global credit crunch has played a large part in the fact that many people are being refused loans in Ireland and in other countries. This is because the credit crunch has served to make lenders much more cautious as to who they wil provide loans to and also how much money the are willing to lend. This has resulted in lots of people having to consider other debt management options such as the Debt Repayment Plan service in Ireland.

Speak To The Debt Advice Team

If you are considering applying for a debt consolidation loan in an effort to assist with any credit or debt issues then please feel free to chat with a member of the Debt Advice Team.

Tell us about your circumstances and we will be able to assist you in understanding what options are available to you in order to get on top of a debt related problem. Please cal us free of charge on the number below:

Debt Advice Team Free Phone Number:  1-800-550-330

Alternatively, you can start a secure online chat by clicking on the 'Live Help' button on the top right of this page. or simply complete our quick contact form by clicking here and one of our advisors will contact you at the time and method that you specify.