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How to perform credit card debt consolidation

A July 2011 report by the Consumer Credit Counselling Service (CCCS) revealed that its clients owed an average of £22,476 in unsecured debt. If you're one of the millions of people who owes an unsustainably large amount of money, credit card debt consolidation could provide you with a way to get your financial troubles back under control. If you're seeking to avoid going bankrupt, this can be achieved through a debt management plan or a personal loan to consolidate debt.

Debt Management Plan for Bad Credit

Unlike an Individual Voluntary Arrangement (IVA), a debt management plan is a non-legally binding agreement with your creditors. You'll need at least 3 creditors and to be in a position to pay them at least £100 per month. Rather than trying to pay everyone, you'll make a single, affordable payment to an appointed intermediary, such as Debt Free Direct, Payplan or National Debtline. After deducting its fee, the remainder will be distributed to your creditors.

Given that you have defaulted on the terms of the agreement, this has negative ramifications for your credit score. However, it's a useful form of debt and credit consolidation for people who already have defaults and County Court Judgements (CCJ's) during the last 6 years. If you have a good credit history, you may be eligible to get a consolidation loan from your bank or a peer-to-peer lender, such as Zopa.com.

Credit Card Debt Consolidation Loan

The higher your credit rating, the lower the cost of borrowing. If you're attempting to repay lots of high-interest charge cards, it can take an age before you'll become debt free. It's referred to as revolving debt because your cards lack a defined term when the debt will be repaid. It can theoretically continue indefinitely.

A loan for consolidating credit card debt enables you to put all of your different debts under one roof. You can either increase the term to improve affordability or reduce the term to minimise the amount of interest that you'll pay. Provided that you comply with the terms and conditions of the agreement, you'll be able to repay your debt off on a pre-determined date.

Cheapest Debt Consolidation loan Deals

  • Sainsbury's Finance - 6.3%
  • Nationwide - 6.4%
  • Alliance and Leicester - 6.4%
  • Marks and Spencers - 6.4%

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