How to consolidate your debts

If you are looking to find out how to get out of debt, then debt consolidation is one of the avenues that you should explore as a means of taking control over your outgoings every month.

Debt consolidation is a financial product which allows you to consolidate or combine all your outstanding debts into one package, meaning that you only have one monthly bill to pay. This might include mortgage and insurance payments as well as any outstanding credit cards and loans that you have.

Consolidating all your monthly expenses into one payment can be a useful way to bring down your interest rates and reduce the total amount that you have to pay by the end of your payment period.

When you apply for a debt consolidation loan you will be asked a range of questions about your financial history such as whether you have a bad credit history, any CCJs (County Court Judgements) against you and whether you are in arrears on any of your payments. many lenders will consider you even if this is the case.

Debt consolidation often takes the form of a secured loan, which is a loan that is secured against any property that you own. This security allows lenders to offer you a lower interest rate, because they have some insurance in the event that you fail to make your repayments. This has the advantage that you might be able to move unsecured debt such as credit cards and unsecured loans across to a secured package, which will help to reduce your interest rate. However, it also presents the risk that you may lose your home if you are unable to make the payments.

Debt Consolidation Impartial Advice

Many companies will offer you impartial advice on consolidating your debts or you can go to a financial advisor or even the Citizen's Advice Bureau for further information. Some other companies will offer you a free quote based upon your circumstances.

Debt Calculator

Money Expert.com even offers a free debt calculator to enable you to calculate how much you are paying out every month and how much you might be able to save by opting for a debt consolidation plan: http://www.moneyexpert.com/DebtConsolidation/Home.aspx

Debt Advisors

You can find a range of debt advisors on the Money supermarket website, and for some impartial advice on consolidating your debts or reducing your debts you could do a lot worse than having a look at what the Motley Fool website has to say on the subject: http://www.fool.co.uk/Get-Out-Of-Debt/guides/Snowball-Your-Debts.aspx

Debt Consolidation Definition

Wikipedia describes debt consolidation as follows:

Debt consolidation entails taking out one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan.

Debt consolidation can simply be from a number of unsecured loans into another unsecured loan, but more often it involves a secured loan against an asset that serves as collateral, most commonly a house. In this case, a mortgage is secured against the house. The collateralization of the loan allows a lower interest rate than without it, because by collateralizing, the asset owner agrees to allow the forced sale (foreclosure) of the asset to pay back the loan. The risk to the lender is reduced so the interest rate offered is lower.

For the full article see here: http://en.wikipedia.org/wiki/Debt_consolidation