How Consolidation Can Help You Clear Your Debts

With debt still climbing, interest rates continuing to rise, and wages reaching new lows against the cost of living, it’s no wonder that more people in the UK are struggling with their debts than ever. Debt has become a national epidemic in the UK. The average household has about £5,980 of debt, much of which is also due to personal debt from credit cards, store cards and other debt sources.

Living with debt is not only financially difficult, it can also lead to stress, depression and isolation. This is why it’s more important than ever that we, as a nation, learn to tackle our debts head on.

Tackling Your Debts with Consolidation

One of the most common ways to tackle debt is by consolidating what you owe. This can be done in one of two ways, either by utilising the services of a debt management company or licensed insolvency practitioners, who will deal with your creditors on your behalf, or by taking out a consolidation loan and using this to clear your debts. Both strategies have their advantages and disadvantages.

The Advantages of Consolidation

The advantages of using a licensed debt management company is that, if you are feeling the stress of living with debt, some of the burden of this stress can be immediately lifted from your shoulders. This is of particular use in the case of people whose creditors are hounding them for money.

Taking out a debt consolidation loan can also be useful, particularly if you have many different debts and are struggling to stay on top of your interest payments. A loan can be used to pay off all of your debts, and then you can pay off the loan in one lump sum per month.

The Disadvantages of Consolidation

Both of the strategies outlines above also have their disadvantages. Debt management companies, for example, often levy charges for their services, and some people who are struggling with debt simply cannot afford to make these payments. Others make promises that they cannot keep, such as assuring you that your creditors will stop calling. Debt consolidation loans are also risky, as they often come with high interest rates. This is particularly true if you have a poor credit rating. A once attractive loan option can quickly turn into a nightmare if you find yourself unable to meet your new payments.