FOREX Magazine

Ins and outs of debt
consolidation in Europe
Credit is a convenient way of buying goods
you need now, then paying for them over a
period of time. However, according to a
recent report by The Money Charity, the
average UK household has nearly £8,000 in
consumer credit debt – from a combination
of things such as personal loans, credit and
store cards and overdrafts.
If you’re managing multiple lines of credit, it
can be challenging to stay on top of
repayment dates and interest rates. So, one
option is to consider consolidating your debts
into a single loan.
We take a look at the ins and outs of debt
consolidation. ‘Taking out a loan to sort out
your debts might sound counterintuitive - yet
it could end up saving you money.'
What is debt consolidation?
Debt consolidation is using one loan to pay
off all your outstanding debts - such as
personal loans, overdrafts, store cards and
credit cards. This can help you regain control
of your personal finances, particularly if
you’re accruing interest on multiple loans or
finding it hard to manage several monthly
repayments.
How can taking out a new loan help you pay off
existing debts?
By consolidating all your debts into a single loan,
you’ll have a clearer view of your finances. This
makes it easier to organize your monthly budget,
borrow to pay them all off – make sure you refer
to the terms of the loan and include any interest
owing, early exit fees or other charges.
It also helps to know how much the total
repayments for all your loans would be, if you
continued as you are. This way you can make
sure you choose a loan provider that won’t just
help you consolidate your debts but also save
you money in the long run.
Choosing a financial provider
It’s important to choose a reputable financial
provider that meets your needs – so make sure
you do your research in advance.
Things to consider:
What monthly repayments can you afford?
Be honest: it’s vital to choose a loan that works for
your circumstances.
Interest rates (APR). How do they compare to
your current rates? Are these fixed or variable?
Ideally, you’ll be looking for a fixed interest rate
that’s lower than your current providers’.
Term of the loan and total amount owing. How
does the length of the loan affect the total
amount you end up paying? If you can
afford it, would you be better off paying
more every month for a shorter term? It might
help to use a debt consolidation calculator.
Fees and charges. Are there fees for setting
up the loan, or early exit fees if you’re able to
pay it off sooner than anticipated? Include
these in your calculations.
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