Debt consolidation is a process of restructuring your existing debt
with your creditors. Debt consolidation is a strategy to lower your
monthly payments and lower the interest you are currently
paying. Debt consolidation is a debt combination system that allows
consumers to combine their assorted unsecured debts into one
payment. Instead of sending out payments on many bank and
store credit cards, for instance, you would make one payment to the
debt consolidation company and that company would then disperse the
funds for you.
For example, you may have an existing loan with
a balance of £2,500, a credit card balance of £1,000 and a store
card balance of £500. These could all be consolidated into one loan
of £4,000. The purpose is usually to lower monthly repayments,
through either lower interest rates on the new loan, or lower
repayments from an extended repayment term, or both. |