Become Debt Free with a Debt Consolidation Loan

Consolidate Credit Card Debt and Unsecured Loans with Bad Credit

Mar 6, 2009

It is possible to become debt-free with a debt consolidation loan. Put unsecured loans and credit card debt under one roof to reduce monthly repayments.

Many individuals turn to debt consolidation loans to put unsecured debts, such as credit card debt, personal overdrafts and unsecured loans under one roof. Credit card debt generally attracts a higher rate of interest than a debt consolidation loan, unless bad credit is an issue. It is possible to reduce monthly repayments on personal debt which helps greatly in terms of paying other household bills.

Benefit from a Low APR on a Debt Consolidation Loan

A debt consolidation loan allows someone with personal debts to enjoy a lower rate of interest than is charged on personal overdrafts or credit card debt. Debt consolidation loans normally charge a low APR, thus helping to reduce monthly repayments. As less money goes into repaying interest, they also allow someone to become debt-free in a shorter timeframe.

Debt Consolidation Loans Mean Lower Monthly Repayments on Personal Debt

As well as a low APR, a further benefit of debt consolidation loans is a longer repayment term. Whilst this reduces monthly repayments and helps in terms of freeing up cash for other household bills, it also means that more interest is paid. It is advisable to keep the term of a debt consolidation loan as short as possible in order to become debt-free sooner.

Is a Debt Consolidation Loan Better than a Debt Solution?

Before deciding whether a debt solution or debt consolidation loan is the preferable option, it is necessary to ask a couple of questions first. How much personal debt exists? Is employment affected by a bad credit rating? Is an unsecured debt consolidation loan available or does the loan need to be secured on the family home?

A debt consolidation loan is the right option for those that need a good credit rating to work in certain professions, such as financial services. Should an unsecured debt consolidation loan be available, it is also advisable to consolidate debt.

However, should someone be struggling with personal debts and a bad credit rating, a debt solution is often the preferred option. This is because bad credit will mean that a low APR isn't possible without getting a secured debt consolidation loan. Turning unsecured debt into secured debt should normally be avoided.

Minimising monthly repayments is often the primary motivation for taking out a debt consolidation loan. Increasing the term of personal debt or turning unsecured debt into secured debt is rarely advisable. However, using an unsecured debt consolidation loan to benefit from a low APR and reduced monthly repayments can leave more money available to help cover household bills.

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