Article Navigation

Consolidating Your Debt

If you are not already up to your eyeballs in debt you may still have some potential sources of new loans available, or existing loans credit lines might be able to be increased. If this is the case, then one option which is open to you is consolidation of debts. This is basically knocking out high interest debt with low interest options to reduce risk or to reduce the overall number of payments you must make. There are several circumstances under which this might make sense: First if you have a large number of small debts which are difficult to keep track of, it may be simpler to get them all under one roof provided that you are not increasing your risks. Against this is the possibility that it may actually be to your advantage to have a large number of small debts as creditors who are owed only small sums are unlikely to take any drastic action. Not recommended in general. Second, if it is possible to borrow from a lender who is less likely to inflict damage on you than an existing creditor. A good example would be paying off a secured loan such as a mortgage with an unsecured loans such as credit cards. This is highly recommended if this is a possibility. Finally if you can borrow from a lender at a much lower interest rate than the existing debts. For example you could increase your overdraft to clear your credit card debts, or borrow from a credit union to pay off a high interest credit card. You are strongly advised never under any circumstances to repay an unsecured debt using a loan secured on your home. If you are subsequently unable to keep up the payments on the secured loan, this could easily turn a crisis into a disaster. You should also be aware that if you deliberately borrow knowing that you will not be able to repay as agreed, you may be leaving yourself open to criminal charges on fraud.

.