As the cost of living crisis continues to increase the financial pressure facing many households in the UK, news that a lack of investment is likely to stop the UK economy from growing any time soon couldn’t have come at a worse moment.
The timing is especially unwelcome when you consider the amount of debt people in the UK face.
According to financial planner Money Advisor, the average amount of unsecured debt per UK adult in June 2023 was £4,087, while the average total per UK household was £65,529.
With financial problems mounting, it’s never been more important to keep a close eye on your debts and make sure they’re properly managed.
One of the most effective ways of doing so is with a debt consolidation loan. But what exactly is a debt consolidation loan and what are its benefits? Greg Potter, Head of Member Experience at Leeds Credit Union, takes a look.
What is a debt consolidation loan?
A debt consolidation loan is a type of loan that an individual takes out to pay off their existing debts. The individual uses the money from the debt consolidation loan to pay off the people or companies to whom they are in debt, then repays the loan in monthly instalments.
Debt consolidation loans can be used to pay off different types of debt, such as credit cards, overdrafts, store cards or personal loans.
What are the benefits of debt consolidation loans?
Taking out a debt consolidation loan is an effective way of taking back control of your finances as it allows you to immediately pay off all your debts and leaves you responsible for just one repayment each month.
When you have several lenders to repay each month, it can be easy to forget to make a payment, especially if the
repayments are for different amounts and due on different dates. Needless to say, this makes budgeting and general money management much more difficult.
Because bigger loans often come with lower interest rates, debt consolidation loans can also lower your monthly repayment amount, reducing your outgoings. The repayments can also be spread over a period of time that is more suitable for you, which could potentially lower your monthly repayments too.
Take control of your debt
A cursory glance at almost any British news outlet will give you an indication of the financial difficulties people in the UK currently face. While this is naturally a cause for concern, it’s important to remember that financial help from reputable lenders is available to anyone who needs it.
Your local credit union won’t charge any set-up fees for their debt consolidation loans, nor should they charge any penalties for early loan repayments, making it easy to take the first steps to getting your finances back under control.
Leeds Credit Union provides straightforward and affordable financial services to people in Leeds.
Photo: Shutterstock
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