Can Borrowing Ever Help? Debt Consolidation Discussed
The common thought is that getting more credit is the worst thing to do.
We discuss a few select cases where borrowing more money could help, in particular debt consolidation.
Lower your monthly debt payments?
Debt rarely builds in one place at a time; a couple of credit cards along with recurrent bills and an overdraft, and all of a sudden, you’re paying money here, there and everywhere!
- There can be the temptation to just make the minimum repayments each month, but this is best avoided as the debt is then never actually paid back!
- An option can be to bring all outstanding debts under one umbrella to reduce costs with just one lower interest rate.
- This could give you the chance of bringing debts under control.
- The method of managing debts is known as ‘debt consolidation‘; for more information click here.
- So if you consolidate your loans, and give yourself the chance to pay it back, then this will help your credit score.
One consolidated loan has a number of associated benefits:
- Reducing the number of creditors you have to deal with
- Reducing monthly repayments to a level which you can afford
- Avoiding further damage to your credit rating (IVAs and bankruptcy damage your credit rating).
- In some select cases, if current interest payments are very high, you can reduce the overall level of interest which is repayable
Warning: Taking on additional debt can cause you serious money problems.
Please only consider taking on additional borrowing if you are completely sure that you will have the means to pay this back. For help, go to moneyadviceservice.org.uk. Please see our Responsible Lending Policy.
There are a variety of other debt solutions available:
- Debt Management Plan (DMP)
- Debt Relief Order (DRO)
- Individual Voluntary Arrangement (IVA)
- Offer in full or final settlement
- Writing off your debts
- Administration Order
- Get free debt advice
Your Credit score
If you have a poor credit rating, then loans can be more expensive.
So before looking ta loan options, we suggest you find out what your credit rating is.
You can try checkmyfile free for 30 days, then for just £14.99 a month after, which you can cancel online at any time.
Loan options depending on your credit rating
- Good – then the high street lenders will probably be able to give you the best rates.
- Bad – typically much more expensive, though guarantor loans are typically the most cost-effective. Quickly get multiple quotes without affecting your credit score.