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If you are one of the many thousands of people to lose their job or to be working reduced hours because of the credit crunch, take heart, there are ways to help your money go further. It’s galling, isn’t it, when you look at your mortgage statement only to realize that you have hardly reduced the capital at all and that all those hard earned pounds have simply been paying off the interest. There is a debt solution for everyone out there that will help you to reduce your monthly outgoings while still paying back what you owe.

You will no doubt have read or heard about debt consolidation, which is basically gathering all your debts together and borrowing enough to clear them all. Then you pay the total debt back on a monthly basis to just the one lender. The chances are that the one monthly repayment will be less than the total of all those monthly repayments you were previously paying. And your payments will actually be reducing the amount you owe, rather than just paying off the accrued interest.

There are two major types of loan that can be used for debt consolidation – the secured personal loan and the unsecured personal loan. It is vital that you know the difference between them so that you can choose the best type of loan for your personal circumstances.
If you are good at managing money, your credit history is likely to be healthy and these characteristics will help you to get an unsecured personal loan. This type of loan is not easy to get and, since the government have tightened up lending restrictions on the back of the credit crisis, they are not getting any easier to obtain.

If you are looking for to borrow up to £25,000 and you can repay over a maximum of seven years, this might be the right type of loan for you – provided you have that blemish free credit history that we spoke about. If you don’t make the repayments, you won’t lose your home but the lender can ask you to pay the total amount due, so it is vital that you have an achievable repayment plan and that you stick to it. A quick look at one of the many online comparison sites will help you find the best deal.

If your credit history is not that healthy, if you want to borrow more than £50,000, or if you need a long repayment term, you will need to consider a secured personal loan. This loan will be guaranteed on the value of your house and if you don’t keep up with the repayments, the lender can sell your house to get your money back. If you don’t want to be faced with repossession, it is vital that you are vigilant with your repayments. Of course, if you don’t have a property to use as security you will not be able to get this type of loan. Whether you decide on a secured or an unsecured personal loan, if you keep up the repayments you will be on your way to restoring your credit history. Additionally, you won’t get that soul-sinking feeling when you look at your statements because you will be reducing the balance with each payment.
All reputable lenders will want to see evidence of regular income in the form of pay slips, so you will need to be in regular employment.  If you are self-employed, you will probably be limited to a secured personal loan.

If you need a tailored debt consolidation program, the Citizens Advice Bureau are very experienced in this area. They will put together a debt management plan for you and negotiate with your creditors on your behalf. The outcome will be frozen interest and reduced payments that are based on your ability to pay.
If you are really under pressure over your debts, contact the National Debtline straight away.

Tags: debt consolidation, debt consolidation loan, personal loans