Friday 19 April 2024

Can Debt Consolidation Work?

Anyone looking to get out of debt or move their finances into a healthier state may have heard a lot about debt consolidation. There are a number of ways in which people can improve their finances but anyone in debt should consider debt consolidation as a viable solution. It isn’t always going to be the best option and you may find that it doesn’t work for you but when the leading debt experts suggest that debt consolidation is a solution you should consider, it is well worth pursuing.

You should make sure that you are in a position to make debt consolidation work for you. A lot of people have attempted debt consolidation strategies but because they never stuck to them or followed them through, they actually made their financial situation worse. This is something that you should bear in mind. There is no magic wand when it comes to removing debt or improving finances. Yes, help is available but unless you show that you are willing to work hard and stick to a plan, you may find that debt consolidation isnt going to be an option that meets your needs.

Get out of Debt effectively

The whole point of debt consolidation is to take a range of debts that you have, pay them by bundling them into one combined debt and then focusing on paying that debt off. This works for a number of reasons.

Focus on your Debt

First of all, having just the one debt to focus on makes life an awful lot easier. If you are juggling a lot of debt and a lot of bills, you’ll find that you may miss a bill or two. However, when you start missing bills, you’ll find that a bad situation becomes an awful lot worse. If you only have one debt payment to take care of each month, you’ll find that life becomes an awful lot easier.

Another reason why debt consolidation works is because it is more effective at reducing the debt. If you have a number of loans or debts and all you do is make payments that meet the minimum payment level, all you are doing is servicing the debt. This means that you never make strides to reduce the debt and if you have one bad month, you’ll find that things can become more difficult However, when you only have one debt bill to pay each month, you should be able to impact on it in a more effective manner. Hitting a debt in a serious manner each month is not just psychologically rewarding, it should ensure that you move to reduce the debt in a better manner.

One thing that is vital to look out for when looking to service your debt is finding an affordable APR. Ideally, the APR after you have consolidated your debt should be a lot lower than the APR for any loans that you are looking to remove. The APR impacts on the amount of money that you have to spend to clear the loan or remove the interest, and this is why it makes sense to find an APR that meets your needs. This isn’t always easy to do but you’ll likely find that the best way to obtain an attractive APR is to apply for a guarantor loan.

While guarantor loans are not technically a new style of loan, they are a style of loan that has become increasingly popular in recent times. The loan is actually a return to an old way of determining who was eligible for a loan, and many people feel that this is a fairer manner. Modern day loans depend on statistics and probabilities, with a lot of the calculations being undertaken without any human involvement. You can see why many banks and building societies would prefer this option because it will help to minimise human error or emotions impacting on a decision, but it is a method of working that doesn’t always put the applicant first.

The real benefit of opting for a guarantor loan comes with the fact that the lender looks at the guarantor as opposed to the borrower when it comes to determining the APR of the loan. In many cases, the credit score of the applicant would see them refused when applying for a loan or would end up being offered a loan with a high APR. The presence of the guarantor changes the outlook of the lender, and this is something that helps with debt consolidation.

With an attractive rate of APR, debt consolidation can definitely work, which is why a guarantor loan can be a suitable option.

Andrew Reilly is a freelance writer with a focus on news stories and consumer interest articles. He has been writing professionally for 9 years but has been writing for as long as he can care to remember. When Andrew isn’t sat behind a laptop or researching a story, he will be found watching a gig or a game of football.