You may have seen companies that offer to consolidate your debts. They may say that it will make the debt easier to manage or cheaper and it could be something that you might be considering. It is worth looking into these types of deals before you make a decision.

Use a company or DIY?

Firstly it is worth thinking about whether you use a company to consolidate your debts for you or do it by yourself. It might be that you can get out a loan which will be enough money to pay off all of your other debts. Alternatively you can go to a consolidation loan company who will do it for you.

You will need to take a look at the costs while making this decision. It might be cheaper for you to organise your own loan than to go to a company to do it for you. However, this will depend on what type of loan you are able to arrange and whether in fact you can arrange one at all.

Savings

It is well worth looking at how much you will save by doing this, before you do it, whether you organise it or get another company to do it. This can be quite difficult to calculate but it is worth the effort. You will need to start by calculating how much interest you are currently paying on your debt. You can work this out per month. You may be able to just look at your past statements and note down how much you paid in interest last month for each one. If you cannot see that information, then telephone customer services and they will be able to let you know. Add up how much interest you paid in total and then you will be able to compare this with the amount of interest you will pay in a month on the consolidation loan and this will allow you to see how much money you will save in a month, if any. Once you have done this you then have to consider how long you will be making these repayments for. A consolidation loan may allow you to make smaller repayments at a lower interest rate but for a longer time. This will mean that in the long term you could still end up paying more money in interest compared with the loans that you currently have. You will need to consider whether having lower payments each month will be enough for you or whether you feel that if you have to pay more overall in order to achieve this that this will not be good enough for you.

One Loan

Having just the one loan to repay can feel a lot easier to manage than having a selection of them. This can just help you to be in a more positive mind set and feel less stressed about the debt and managing it. However, there is a risk with doing this. You may feel freer with regards to debt, even though the amount of money that you owe will not be reduced or perhaps will be even higher. This feeling of freedom might make you feel that it is okay to get additional debts as well. This can be dangerous, as you could end up in a spiral of borrowing again and get even more debt. Therefor eit is really wise to cancel your credit cards and make a determined effort to not get into any other debt until you have paid off this loan.

As you can see it can be quite complicated calculating whether a consolidation loan is a good thing for you. It may be well worth discussing it with someone else and if you are struggling, getting help with the calculations to see how you will stand financially if you do get the loan. You may even benefit from seeing a financial advisor for help. They may be expensive, but they could save you a lot of money if they find the right way for you to repay your debt. If you are tight for money you may be able to get some free help and advice from a debt charity.

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