Frequently asked Debt Consolidation questions
- What is debt consolidation?
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'Debt consolidation' means combining multiple debts into one. There are many ways of doing this, and each method is designed to help people in different circumstances.
However you consolidate your debts, it could both reduce your monthly outgoings and make managing your finances simpler.
- How can I consolidate my debts?
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If you're thinking about consolidating your debts, call us on 0800 505 3848 to discuss all your options. We'll help you decide which form of debt consolidation is right for your needs.
A few ways to consolidate your debts include:
Debt consolidation loan
Trust Deed
DAS (Debt Arrangement Scheme)
Debt management plan
Which is right for you will depend on the situation you're in. If you're unsure, all you have to do is call.
- Could debt consolidation help me avoid bankruptcy?
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There are some types of debt consolidation that are designed to help people who really can't afford to repay their debts, but don't want to go bankrupt. Others could help you avoid getting to the stage where you're even thinking about bankruptcy.
There are solutions available for all levels of debt and personal circumstances. However, don't forget that bankruptcy can be the best solution for some people, which is another reason to discuss your options with us before you go ahead.
- Can I consolidate secured debts?
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Some types of debt consolidation, such as a debt consolidation loan, enable you to consolidate secured debts. Those that don't will normally make sure you have enough room to cover your other essential costs, including secured debt repayments.
- Can I consolidate my debts if I have a bad credit rating?
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It depends on your situation. Some solutions, such as the Debt Arrangement Scheme or an IVA (Individual Voluntary Arrangement), can help people regardless of their credit history, as long as they meet the other qualifying criteria.
If you're looking for a debt consolidation loan, a bad credit rating could hold you back - but that's not to say you won't be able to get one. Whatever your situation, we'll do our best to help you find the right solution for your needs.
- Will consolidating my debts affect my credit history?
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Again, it depends which debt solution you require. A debt consolidation loan, for example, could actually help you to improve your credit rating. This is because it will involve paying off existing debts and making monthly payments on your new loan, both of which will leave positive marks on your credit history.
On the other hand, any debt solution that involves directly reducing your monthly payments - including DAS, IVAs and Trust Deeds - will harm your credit rating. But failing to get the help you need could have even more serious consequences in the long run.
Types of debt consolidation
There are several ways to consolidate debt, and the right one for you depends on the kind of situation you're in. Before deciding on the right option for you, you should always get the opinion of an expert debt adviser. Call us on 0800 505 3848 and we'll be happy to help.
In the meantime, here is a rundown of some of the ways you could consolidate your debts.
Debt consolidation loan
If you have a number of debts and you'd like to make them easier to manage, a debt consolidation loan could help you. By using the loan to pay off existing debts, you'll effectively be combining those debts into one - which could make them a lot easier to manage.
You may also be able to reduce your monthly payments by repaying the new loan over a longer period of time. A downside of this is that you'll also be paying interest for longer, which could increase the amount to be paid overall.
Note: You should be cautious about securing any debts against your home, as your home could be sold if you don't keep up with your payments. Extending your repayment period could increase the total amount to be repaid.
Debt Arrangement Scheme (DAS)
If you're struggling with your debt repayments, the Debt Arrangement Scheme (DAS) could help you to make them affordable again. If your lenders agree, your unsecured debt repayments will be made more manageable, leaving you with room for your other living costs. All interest and charges on those debts will be frozen. It's a legal agreement, which means once it's in place, your lenders can't take any further action against you.
However, there will be an impact on your credit rating for six years after your agreement has finished.
Learn more about DAS
Trust Deed
If you can't ever see yourself repaying your unsecured debts in full, but don't want to apply for bankruptcy, a Trust Deed could be an option. If agreed, you will have to repay as much of those debts as you can afford for (normally) three years, and on successful completion the rest of your unsecured debts will be written off.
A downside of this is that your credit rating will be affected for six years after your Trust Deed starts. If you're a homeowner, you may also have to release most of the equity in your home as part of the agreement.
Learn more about Trust Deeds
Debt management plan
A debt management plan works in a similar way to the Debt Arrangement Scheme, but it's not legally binding. During a debt management plan, your unsecured debt repayments are reduced to an affordable level, and interest and charges may be reduced or frozen (although there no guarantees your lenders will agree to this).
Because you won't be making the repayments you originally agreed, your credit rating may be affected. And if your lenders don't agree to freeze interest and/or charges, the longer repayment period could increase the overall amount to be paid.
Learn more about debt management plans
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