Recent research, which was carried out by the Citizens Advice Bureau, has highlighted a trend amongst debt advisors in the UK. They are showing a rapid growth in the number of individuals coming to them with consumer credit debt problems. The Citizens Advice Bureau looked at over 8,000 debt cases and the figures showed that the average amount that was owed is over 14 times the average monthly income. That’s a significant level of unsecured debt and the causes are personal and wide ranging.
Everyone faces different financial circumstances, different pressures and therefore, different routes into debt. With this fact in mind, it’s important to remember that there is no quick-fix debt solution and no one-size-fits-all answer to the mounting burden of personal debt. There could well be similar causes for this financial ill-health, in that a sudden change of circumstance can lead people into debt problems but this can be caused by a range of factors. Unforeseen expenses caused by illness, loss of a loved one, relationship breakdown and losing your job are the most common causes of serious debt problems. Often, to cover the resulting outgoings, people will resort to their credit cards. It’s understandable that under stress, the pay now and worry about it later approach to your bills can be tempting. Also, as we’re emerging slowly from a period of recession and unemployment, the reasons behind a growing number of people looking for debt consolidation advice are even more evident.
Debt consolidation is often the best debt solution for those who are experiencing this type of situation. Essentially, it’s the practice of taking out a loan to pay off the rest of your loans. Often, this will secure a lower interest rate, reduce the amount that you pay out each month and allow you to service just one loan, rather than deal with a host of different creditors. It standardises your credit payment too, so rather than a range of times throughout the month, you can build your budget around one monthly outgoing. Working with a specialist financial advisor or debt counsellor, you can draw up a plan to manage your debt problem. You may find that the best way to facilitate this debt is with a consolidation loan, tailored to suit your personal circumstances.
You might find that you can significantly ease your debt burden by consolidating a number of unsecured loans into one unsecured loan. However, you’ll get a better deal by securing your assorted unsecured debts against one of your assets. This asset then serves as collateral against the loan. For most people, the asset will be their home as it’s the most valuable thing they own. Borrowing against collateral will often afford you a lower rate of interest than borrowing without it. Remember though, you are entering an agreement that will allow your creditor to reposes your home to fund repayment of the loan. Obviously, this means that their risk is greatly reduced, so they can offer loans with a lower rate of interest.
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A debt consolidation loan will cover the total cost of all of your unsecured debt repayments. It pays off all of your outstanding debt at once, saving you from being charged extra for late payments and increasing interest rates. For more information, visit www.debtsolver.co.uk