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I heard a friend saying that he is no longer scared of loans as he can easily repay them through debt consolidation loan. Is it that easy to combat debts through debt consolidation loan? Are there any issues associated with this method of debt settlement that need due consideration? The following article is a guide to debt consolidation loans in UK and discusses the important issues that remain in the mind of borrowers related to it.
It is really easy to avail of debt consolidation loans. Almost every lender in the UK will willingly provide the finance you need to clear your debt. This is even when there is no collateral to back the loan amount. Gone are the days when people in debt were considered untouchables. Debt is an accepted fact, which thrives due to the increasing expenses with the current materialistic lifestyle. Thus, the debtors are easily able to get finance to settle their debts.
However, there is a limit to the amount of time a person can push their finances to the edges. Accumulating huge amount of loan each time to be repaid through one debt consolidation loan would be stupid When a debt consolidation loan has been secured against one’s home or certain movable or immovable assets, the stake is directly on the mortgaged asset. Inability to repay the loan installments will result in repossessing of the property. Even if the debt consolidation loan is unsecured, the lender has the right to recover the unpaid amount through court proceedings.
Another argument for the judicious use of debt consolidation loans is that the equity so consumed in the home could have been used for other more important purposes. Equity in the home entitles the borrower to better deals for any loan he/she approaches. After the entire equity is consumed the borrower will be forced to accept deals with non-homeowners at equal or comparatively higher interest rates.
Doesn’t this make a good case against the misuse of debt consolidation loans? The first step in preventing the abuse of debt consolidation loans is to decide when to allow debt management agency intervention. This step will involve assessing the capacity with respect to the loan amount. There should be an accurate measurement of capacity to avoid future consequences. Engaging the services of a debt management agency when the debt can be easily settled through one’s own resources would be a misuse of debt consolidation opportunities. On the other hand, not engaging a debt management agency, knowing that the loans are beyond reach, will only give a greener pasture for the loans to grow without limit. Thus, a proper assessment of one’s capability should precede any decision of taking a debt consolidation loan.
After accepting the intervention of the debt management agency, the next important task would be to decide the amount to be drawn as debt consolidation loan. No, you do not have to quote any amount suddenly. Debt Consolidation The best way to appropriate amount of debt can be done by consolidating or clustering various debts. Debts include loans due from credit cards, store bills, bank overdrafts, etc. While listing the debts for settlement, debtors must ensure that no debt is uncollectible, be it big or small. The amount withdrawn under debt consolidation may be higher than the loan amount. The cheap finance available for debt settlement can be saved for use for other purposes.
What sets a debt consolidation loan apart from other loans is the guidance provided by the lender in eliminating the debt. This facility is purely optional and repayment can be done by the borrower himself. However, the convenience we are talking about is for those people who find it difficult to take out time from their busy schedules. Furthermore, they will voluntarily take the services of a debt management agency to avoid conflicts with creditors. Lastly, and most importantly, debt management agencies have better capabilities to deal with these situations. They are good negotiators and can strike a deal which could save many pounds for borrowers.
Like any financial matter, the structuring of a debt consolidation loan should be decided with discretion. The structure of the loan refers to the terms on which the loan is taken. This includes interest rate, monthly installment amount, prepayment facility etc. Don’t hesitate to question terms you find unfair. If necessary seek independent advice from independent financial advisors. This would be helpful as they have specialized knowledge of the area. Independent financial advisors provide guidance on important matters relating to loans. Several easy-to-use software such as debt consolidation loan calculators have also come up to help borrowers in the decision-making process.
These steps, although time consuming, will ensure that the debt consolidation loan ends up being a burden and does not turn into one. Strict adherence to the steps ensures but does not guarantee against the ill effects of the debt consolidation loan. However, rest assured that you took adequate steps even though the debt consolidation loan went bad due to some unavoidable factors.
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