What is debt consolidation?

Debt consolidation is where, through various offers available both through the internet and the media, you take all of your existing debts and consolidate them into one single loan. This normally means that you end up paying a smaller amount each month and is easier to keep track of as you only have to deal with one lender.

The purpose of loan consolidation is to:

Make keeping track of your repayments simpler - you have only one payment each month as opposed to manyl

• Lower your monthly payments (by increasing the length of time you have borrowed the money over)

• Most importantly, limit the chance that you may default on your loan(s) by creating more affordable monthly payments.

Interest Charges: Please look carefully when choosing to consolidate your loans. The key figure here is not the monthly payment, but the APR. Although it may not seem so, it is more financially prudent to pay £300 per month over 5 years at (say) 8% APR than it is to pay £100 per month over 30 years at (say) 15% APR.

General Information:

If you are married, and both hold loans in your own name - the option exists for you to consolidate both sets of loans into one single loan. Please bear in mind , however, that when you do so you agree that you are both liable for the loan, not just the amount that you originally were in debt for. In real terms, this means that should (for whatever reason) your husband or wife become unable to pay their share of the loan, you would automatically become liable for the full amount.

Bear in mind that there are disadvantages to loan consolidation. By increasing the term of your loan, the interest due increases. This means that you end up paying back a larger sum.