When should you use debt consolidation?

Ailsa Adam October 31, 2020

Perhaps it is useless to explain the meaning of debt consolidation because we all know about its role. Merge all debts in one and offer an integrated loan on a fixed interest with one instalment. That is all!! The important is to discuss when actually should you opt for debt consolidation.

Most of the people believe that the moment that are caught by multiple debts, the consolidation can be exploited as the ultimate solution. You know what; one also needs to pay attention to his/her personal finances before exploring a financial product.

Here are some considerations that explain when you should go for debt consolidation?

You have repayment plans.

The lender is not a magician, it can provide a solution, but for that, your finances should be in the right condition. After debt consolidation, you will pay one instalment on a fixed rate in exchange for multiple repayments on varied rates. It means the financial burden will be lighter, but that does not mean that you plan nothing for the repayments.

There should be a proper repayment plan that you can present to the lender. At the time of the application process, the finance company always wants to know how you will pay the instalments. It is not wise to get debt consolidation with no further planning for repayments.

Your debts can be covered under debt consolidation.

Debt consolidation does not encapsulate every debt. This product majorly covers small obligations and not big ones such as home loans. It is advisable to consolidate the high-interest debts as in that case only you get the actual benefit of debt consolidation loans.

The debts that can be covered are –

  • Car loans
  • Credit cards
  • Unsecured personal loans
  • Store cards
  • Overdrafts
  • Utility bills etc.

You have a bad credit situation due to multiple debts. 

If you have only or two debts, but due to past payment flaws, poor credit situation happened, perhaps that does not need debt consolidation. If the drop in credit scores happened due to multiple and scattered debts, you could avail this option.

For a person with derailed payment history, it is always easier to get back the normalcy through the merge of all pending debts. The no-obligation quote is another significant factor that helps in gaining better control over life. The debt consolidation loans for bad credit people with no guarantor offered by a direct lender are among the most sought-after options. People use them to get back the balance of their personal finances.

You have no other option.

It would help if you never forgot that every small and big financial action that you take gets under the notice of the credit reference agencies. In addition, the finance company where you apply for various financial products can see your credit history.

A person with debt consolidation in the record to manage the debts may look financially weak in the eyes of the financial companies. In future, this point may make you answer more questions while exploring any financial solution. It is the reason that you should consider this option only when you  have no other option.

You need to switch to a new job and want to improve your finances.

We all know that poor financial past always stands in the way to professional progress. Several pending debts, poor credit, rejected applications etc. can make your new employer reject your application.

To grow in career, people need to look good and perfect in every sense, through debt consolidation; you can tackle the mess of finances. Isn’t it great that we have a financial tool that can help in our professional lives? Yes, it is.

The above reasons explain why and when debt consolidation can be significant for you. For those with big plans, for those with poor payment history should always consider it as an escape window. Varied amount limits are available in the market irrespective of credit score constraint. From a small amount of £1000 or £2000 or £3000 loan for bad credit people to £20,000 for debt consolidation, varied choices are available. Scrutinise your finances and decide whatever is best for you.

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