If you are in a considerable amount of debt due to all sorts of loans, then debt consolidation might seem like the best option. Let me share my friend's experience with you.
My friend got into bad debt when he was injured through a roofing accident. He had to give up work and wait for an operation on his back. In the meantime, he needed cash and there was only one solution. He decided to take out a rather hefty loan to cover his losses and pay his rent etc, but this soon spiralled out of control. With £20,000 worth of debt, the only solution for him at the time was to try debt consolidation. The rates seemed attractive and it was his only way out. That was 5 years ago, and now that he has been back in work for 3 years, he is still paying a hefty amount to his debt consolidation company on a monthly basis. This will be ongoing for at least the next 10 years.
I think it is a shame that people feel so helpless that we have to let the debt consolidation companies take over, but for some it is the only way out.
I had a look at Martin Lewis' - The Money Saving Expert - blog on his website, as he detailed the debt consolidation problems facing many of us. He claims that consolidation for consolidation’s sake is ridiculous. Debts at 4%, 2% and 1% are not worth consolidating into a loan at 33%. I do see his point, and it is worth thinking about.
Martin Lewis believes that the two prime considerations for those in debt crisis (regarding the debts themselves this is) should be:
a) to reduce the cost of the debts
b) to ensure the monthly repayments are manageable.
For more information on Finance, check out my other blog: Guide to Finance
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