Insolvency in the UK is increasing at an alarming rate. Between July-September 27,087 personal insolvencies were filed. This number is 8.8% higher compared the previous quarter. The factors fueling the growth of insolvency are global financial melt down, credit crunch, unavailability of easy credit, higher per capita credit card presence and increased cost of living. This is also necessitating the demand for effective debt management before the debt situation becomes really unmanageable for the Britons. Debt consolidation is smart financial tool applied by debt management agencies to solve the debt problem
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Debt consolidation is the process of piling all the unsecured and higher rate loans(including credit card and store card bills) and paying them off with the help of a fresh loan. The loan raised for this purpose is known as the debt consolidation loan and is generally secured(though unsecured options are available) in nature. As, these loans are granted against the residential property of the borrower, they charge a lower rate of interest and are available for a longer repayment tenure. There are scores of lenders offering this loan and online debt consolidation help.
Debt consolidation offers the borrower manifold advantages. He/she has to deal with only one lender after the consolidation process. As the monthly outgoing amount has been reduced, he/she can easily maintain regularity in the monthly installment payment. And, every on-time paid installment adds to the improvement of the credit score of the borrower. However, the process of consolidation is not legal binding. So, the borrower needs to choose an agency that is reputed and trust-worthy. While opting for consolidation, the borrowers are advised to go for a short term repayment tenure. In case of long term repayment tenure(5 years or more) the borrowers actually pay more compared what they owe.
