Debt consolidation is a practical solution designed to alleviate the financial situation of individuals faced with multiple outstanding loans. The approach is also beneficial to anyone who has long-term debt obligations and the situation is compounded by unexpected financial problems that reduce disposable income.
When properly implemented, debt consolidation can provide a cost-effective way to repay outstanding debts. It entails swapping several small loans for a single, larger loan with lower interest rates. The consolidated loan is typically secured by the debtor’s property.
The debt is repaid over long periods in smaller monthly payments. Debt consolidation through a reputable firm like Trust Deed Scotland alleviates the burden while working towards a debt-free, secure financial future.
The consolidation option serves some debtors better than others. Experts do not recommend consolidating loans when an individual still owes money on another consolidation plan. The same applies to anyone looking to free up store and credit cards that are earmarked for use in the future. Instead, the solution is ideal for reducing unsecured debt permanently.
Research studies conducted in the UK revealed that up to 47 percent of unsecured loans form part of consolidation plans. Some of the borrowers use the loans for home improvements (24 percent), vehicle purchases (17 percent) or paying for commitments like weddings and vacations (6 percent). The trend shows a shift when compared to data collected in 2016.
Debt Advice: Consolidation benefits
Consolidating multiple loans into one manageable debt provides several key benefits. Many debtors enjoy the peace of mind that comes with being debt-free thanks to consolidation plans.
Some of the key advantages include:
Lower Interest Rate
Opting for consolidation allows you to take advantage of significant savings on the applicable interest rate. The plans are particularly beneficial to anyone with credit card debt, which is associated with higher interest rates. By combining the debts into one plan, you will benefit from a lower rate and affordable monthly payments. If done correctly, consolidation eliminates the need to worry about the possibility that the lender could repossess house.
Improve Your Credit Rating
Rebuilding your credit rating is one of the major benefits of consolidating several loans. Lower interest rates and manageable monthly payments make it easier to repay the debts over the agreed period. This contributes to a better financial future thanks to a favourable credit score.
Proper Debt Management Helps Reduce Stress
Financial woes are linked to a marked increase in stress levels. By consolidating your debts, you can cope better with living expenses and council tax debt. You will no longer face sleepless nights thinking about bailiffs and debt collectors. Elevated stress levels are known to compromise performance at the office, which could affect employment.
Single Payment Via Your Bank Account
Reducing the number of monthly payments to a single payment drastically changes the situation as you clear outstanding loans. You are sure to feel the positive impact of focusing on one smaller payment. As a result, you can manage to cover living expenses like utility bills and transport costs.
If you have multiple store and credit card debts, you can breathe a sigh of relief by dealing with a single loan provider. Consolidation eliminates multiple deadlines and letters of demand from different lenders or dealing with debt collectors. In addition, you can avoid the threat of bankruptcy.
Select The Right Loan Provider With The Best Debt Consolidation Deals
Choose the right debt consolidation provider from wide-ranging options. Many reputable UK lenders, including Trust Deed Scotland, offer secured loan consolidation services in addition to expert debt advice. You can compare lenders online and use tools like loan calculators to determine the right option. Most of loan providers offer free quotes.
Stop Collection Calls From Bailiffs And Debt Collectors
Regular calls from lenders and debt collectors can compromise your peace of mind. Thankfully, you can count on Scottishtrustdeed.co.uk to help clear your debt in a practical way. This makes it easier to reduce or eliminate missed payments. Bailiffs often intimidate debtors by threatening to repossess the house.
You can take advantage of wide-ranging options for consolidating all your outstanding debts using secured loans. When faced with an unfavourable financial situation, it is possible to refinance your residential property, obtain a home equity line of credit or opt to take a second mortgage. The repayment of the loan can be secured by pledging valuable assets like your home or vehicle.
Mortgage loans typically use the residential property as security. The same applies to consolidation plans offered by Scottishtrustdeed.co.uk. These loan agreements differ significantly from unsecured loans, which are based on a verbal promise to repay the loan amount plus interest over a specified period. Good examples of unsecured loans are credit cards that typically come with high-interest rates.
Many people who accumulate considerable credit card debt find it difficult to balance their finances. In such cases, it becomes necessary to opt for debt consolidation to ease the pressure and clear the debt permanently. On the downside, unsecured loans increase the cost of borrowing because lenders mitigate elevated risks of default with higher interest rates.
In some cases, debtors benefit from tax deductions on interest payments, thus contribute to a healthy financial situation. The tax benefits are usually applicable to loans secured by real estate.
Debt consolidation plans that are secured by assets require a disciplined approach because defaulting on the repayments places the pledged property at risk. This means that the debtor could lose a vehicle, a house, retirement fund or life insurance. When a debtor pledges financial products like life insurance, the policy may not be redeemable until the outstanding debt is fully paid.
The biggest benefit of unsecured debt consolidation is that debtors do not have to worry about losing any assets in the event of failure to repay the debt.
The repayment period of the consolidated loan can be longer than the initial debt obligations. However, the debtor can still save on the costs of servicing the debt due to the possibility of negotiating a lower interest rate.
Trust Deed Example
Example Unsecured Debts
|2||Credit card 1||£6,812|
Your Monthly Repayments Would Be
a Scottish Trust Deed £748
(total contractual repayments)
a Scottish Trust Deed £295
(total contractual repayments)
* Subject to creditor acceptance
* Payment subject to individual circumstances
* Credit rating may be affected
* Fees apply, subject to individual's circumstances. For more information on our fees click here