I heard a friend saying that he no more feared debts because of the ease with which he can repay them through a debt consolidation loan˳ Is it so easy to counter debts through a debt consolidation loan? Are there any issues attached to this method of debt settlement that needs appropriate consideration? The following article is a guide to debt consolidation loans in the UK and discusses important issues that linger in the mind of borrowers related to it˳
It is really easy to avail of debt consolidation loans˳ Almost every lender in the UK would willingly offer you the necessary finance to eliminate your debts˳ This is even when there is no collateral to back the loan amount˳ Gone are the days when the persons in debts were considered pariah˳ Debt is an accepted fact, which with the present materialistic lifestyle crops up because of increasing expenses˳ Thus, debtors are able to get finance easily to settle their debts˳
However, there is a limit to the times that one can push his finances to the edges˳ Accumulating a huge mound of debts every time to be cleared through a debt consolidation loan will be unwise˳ When the debt consolidation loan has been secured on ones home or certain moveable or immoveable assets, the stake is directly on the asset pledged˳ Incapability to repay loan instalments will result into repossession of the asset˳ Even when the debt consolidation loan is unsecured, lender has the right to recover the amount unpaid through court proceedings˳
Another argument for a judicious use of debt consolidation loans is that the equity in home so consumed could have been used for other important purposes˳ Equity in the home makes the borrower eligible for better deals in whatever loan that he approaches for˳ Having consumed the whole equity will force the borrower to accept deals at par with the non-homeowners or at comparatively higher rates of interest˳
Doesn’t that make up a good case against the misuse of debt consolidation loans? The first step in preventing the misuse of debt consolidation loans is deciding when to allow the interference of a debt management agency˳ This step will involve gauging ones capability in relation to the debt amount˳ An accurate measure of the capability must be reached to avoid future repercussions˳ Engaging the services of a debt management agency when the debts can be easily eliminated through ones own resources will amount to a misuse of debt consolidation opportunities˳ On the other hand, not involving a debt management agency knowing that the debts are beyond reach will only give debts a greener pasture to grow without bounds˳ Thus, a proper appraisal of ones capability must precede any decision to draw debt consolidation loans˳
Having accepted the intervention of the debt management agency, the next important task will be to decide the amount to be drawn as debt consolidation loan˳ No, you are not to quote an amount randomly˳ The best measure of the appropriate amount of debt consolidation loan can be had by consolidating or clustering the various debts˳ Debts include debts on account of credit cards, store bills, bank overdrafts, etc˳ While listing the debts for settlement, debtors must ensure that no debt is left unattended, whether big or small˳ The amount drawn under debt consolidation may exceed the amount of debts˳ Cheaper finance available for debt settlement can be saved for use in other purposes˳
What distinguishes a debt consolidation loan from the other loans is the guidance provided by the lender in eliminating debts˳ This facility is purely optional and borrowers can themselves conduct the repayment˳ However, the facility that is being talked of is for individuals for whom it is difficult to take time out of their busy schedules˳ Moreover, they would willingly engage the services of the debt management agency to avoid confrontation with the creditors˳ Lastly, and the most important of all, debt management agencies have better faculties to deal with these situations˳ They are good negotiators and can bargain a deal that can save several pounds for the borrowers˳
Like in any financial matter, the structure of the debt consolidation loan should be decided with prudence˳ By the structure of the loan is meant the terms on which the loan is taken˳ This includes the rate of interest, amount of monthly instalment, prepayment facility, etc˳ Do not hesitate in questioning the terms that you find unjustifiable˳ Take independent advice if necessary from independent financial advisors˳ This would be helpful because they have a specialised knowledge of the field˳ The independent financial advisors provide guidance on important matters related to the loan˳ Many easy to use softwares like debt consolidation loan calculator have also come up to help borrowers in the decision making process˳
These steps, though being time consuming will ensure that the debt consolidation loan eliminates a burden and does not turn into one˳ A strict adherence of the steps ensures but not guarantees against the bad effects of the debt consolidation loan˳ However, there is the assurance that you took sufficient steps though the debt consolidation loan turned bad because of certain unavoidable factors˳
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