Pros and Cons of Debt Consolidation

Should you consolidate your debts or not? For some people, debt consolidation is a great idea - for others, maybe not.

It depends on what kind of debts you're thinking of consolidating, how well you think you can resist temptation, what your credit rating is like...

Pros of Debt Consolidation

• Can come with a lower APR
• Can be repaid over a longer period of time, resulting in lower monthly repayments
• Simplifies your finances by replacing many debts with one:
  • Reducing your stress
  • Helping you avoid late / non-payment, which can affect your credit rating and lead to charges, higher interest rates, even legal problems.
• You only have one creditor to deal with
• Golden opportunity to cut up your credit cards and cancel any overdraft facilities

Cons of Debt Consolidation

• Can increase total amount you repay if paid back more slowly
• May not offer the flexibility of (e.g.) a credit card, which lets borrowers pay off as much / little as they wish (as long as they make a small minimum payment)
• Requires self-discipline because it 'frees up' credit cards, overdrafts and other credit - if you run up fresh debts, you'll be worse off than you were when you consolidated your debts, as you'll have to pay off your new debts and your consolidation loan.

17.9% APR (typical variable).

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THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT. DEBT CONSOLIDATION MAY INCREASE THE AMOUNT TO BE REPAID IN THE LONG TERM. Subject to status. A 12.5% arrangement fee is payable on completion. The actual rate available will depend upon your circumstances. Ask for a personalised illustration. Calls may be recorded.

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