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A guide to private loan consolidation

When you owe money to several creditors, this makes your personal finances far more difficult to manage. Private loan consolidation enables you to pay off all your debts and close down old accounts. As you're making a single repayment to just one lender, you're far less likely to fail to make payment. This makes your personal finances much easier to manage than was formerly the case.

When your debt repayments are too high, consolidating debt and extending the repayment term improves affordability. However, it does increase the cumulative amount of interest that you'll repay. If you're seeking to avoid debt interest, you'll want to keep the repayment term to the bear minimum. It's all about trying to strike a balance between these two objectives.

If you're looking to consolidate your debts, you'll need to choose between an unsecured loan and a secured homeowner loan. The option you choose will largely depend upon your credit status and how much you need to borrow. Secured consolidation loans are available to property owners who have sufficient equity in their home. Unsecured credit is preferred because, if you fail to make the repayments on secured debt, you could lose your property.

If you do have a bad credit history, you don't need to borrow money against your home. Rather than private loan consolidation, you may decide to start an individual Voluntary Arrangements or debt management plan. These allow you to repay your debt at a rate that's affordable to you. If you're unsure how to proceed, it's advisable to get advice from a free credit counselling service, such as the Citizens Advice Bureau (CAB).

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