Why A Loan May Not Help But Hinder You

Taking out additional borrowing is not recommended, unless you can genuinely adapt your spending habits to fit your new repayments and know you will be able to pay the loans of early.

Expensive and unsecured loans are not the best way to solve debt problems. In actual fact, getting more credit, re-financing or mortgaging, and borrowing more frequently leads to larger debts and a deeper hole in your financial pocket.

Consolidation loans often require that you put your home up as security to personally guarantee your can make the repayments. This means you could lose your home.

Frequently people are confused between debt consolidation loans and IVAs. However, these are not the same and have many key differences. Certainly there are other debt solutions to consider when trying to solve debt problems.

Loan consolidation involves making repayments towards old debts while creating a new debt. You may no longer owe your creditors but you owe the company that gave you the new consolidation loan.

The IVA debt solution (Individual Voluntary Agreement) involves making one payment each month towards combined existing debts. No new borrowing or credit is taken and you are not taking out a new loan. You are simply paying your supervisor one payment each month which they then distribute between your creditors at regular intervals.

IVA interest is reduced or frozen entirely.

However, a debt consolidation loan has one interest rate for the total balance of debt and enables you to get further credit (although increasing creditors and debts would defeat the object of getting a debt consolidation loan in the first place).

Debt Solutions: Informal Debt Consolidation
Debt Solutions: Informal Debt Consolidation: Informal Debt Consolidation
Debt Solutions: Informal Debt Consolidation: About Loans
Debt Solutions: Informal Debt Consolidation: Debt consolidation loans: what you should know

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