To consolidate debt, you get a loan. An essential thing you should know about debt consolidation is the benefits it offers. You’re looking to lower the interest rates on your debt: if the interest rates on your current debt are quite high, then you can usually save money by rolling it all into a debt consolidation loan. Your guide to consolidating debt, Private rents in London plunge by up to 34% amid Covid crisis, UK factories ease pain of coronavirus production slump, Return of virus sends consumer confidence into sharp decline, Gap considers store closures placing thousands of jobs at risk, Criminals have taken £2BN in furlough cash fraud, UK car buyers face £1,900 additional cost in case of no-deal Brexit, Sunak announces fresh financial rescue package for businesses hit by Covid lockdowns, Pandemic triggers huge cuts in large brand advertising, PayPal introduces Bitcoin and crypto spending, National debt rockets to its highest level since 1960, Getting To Know You: Colin Curtis, founder, Support the Goals, Simple strategies to get the most from your bank account, Getting to Know You: Jag Panesar, Founder, digital agency Xpand, Gain competitive advantage through collaborative relationships. Copyright © 2014–2020 Limited. IF YOU ARE THINKING OF CONSOLIDATING EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY. Debt consolidation leaves you with just one payment per month, so this is the primary effect of a consolidation loan. For more information on how we use your data, please see our privacy policy. How does debt consolidation work, and which consolidation solution is right for you? A debt consolidation loan lets you roll lots of those monthly charges into one payment that comes out on the same day every month. Disclaimer: All information and links are correct at the time of publishing. Make your finances easier. If you can transfer the balance of your credit cards onto a single 0% credit card, you’ll be able to take advantage of not paying any interest on the debt during your interest-free period. Sign up for tips on how to improve your credit score, offers and deals to help you save money, exclusive competitions and exciting products! How debt consolidation loans work. That way, you only make one monthly repayment and that works towards clearing all of your debt. Step Two: work out how much you need to borrow. Think Park, And if you’re leaning towards a balance or money transfer card, this’ll allow you to get an understanding of the fees involved, and whether or not their limits are enough to cover what you owe. (Some brokers — like us, hey! Do you feel stressed by the debt you owe and by having to pay dozens of bills every month to meet your financial obligations? If you have ten debts to pay each month, you must make ten payments. This means you can focus on paying back the debt itself which should mean you can pay it off quicker. Now that you understand this process, if you would like to use it, it would be helpful to start looking for a company that provides debt-consolidation loans. Most of the remainder of this post will address the second type of debt consolidation: debt payment consolidation. It is quite simple, actually. There are a number of reasons people opt to consolidate their debts and, contrary to popular belief, not being able to manage them isn’t always the main driver. For secured loans a broker fee of up to 7% of the loan amount may be payable. As with most loans, there are two types of debt consolidation loan: secured and unsecured. This might slightly vary depending on the route you’ve gone down, but, quite simply, all you need to do is use the funds you’ve been granted with either your loan, balance or money transfer card to pay off your existing lender in one lump sum. You can become a confident consumer sought after by lenders in just a few short years. Suppose that you and your spouse have five credit cards, each with a balance of $5,000.