IVA : What Is A Consolidation Loan ?

Many thousands of people across the U.K. are struggling with serious personal debt problems, and to some it may feel like they are carrying the weight of the world on their shoulders.

But there are some very effective debt solutions available, which are able to solve the debt problem and help remove the worries.

One such debt solution is a consolidation loan.

So what is a debt consolidation loan ?

A debt consolidation loan is the name given to a loan, from a bank, building society or loan company, where the money raised is used to pay off existing debts.

The original debts are consolidated into one payment, rather than the several original payments.

One main advantage of the consolidation loan is that the new monthly payment is normally a lower amount when compared to the total of the original debt repayments.

It is therefore more affordable to the debtor, and because there is just one monthly payment, it is easier to keep on top of.

For many people, a consolidation loan will be the best option available. It can be quick to arrange, and can save the debtor a considerable amount of money and stress.

However, the big question you need to ask yourself, when considering a consolidation loan is, will it clear all your existing debts in full, and if not, can you afford the extra debt ?

Falling into the trap of believing a consolidation loan is the way forward, without actually taking the time to calculate whether it is affordable could lead you into a spiraling debt crisis, which will inevitably lead you into a cycle of deeper and deeper debt.

So make sure you do your homework, or take advice from a financial adviser or debt consultant.

Here are a list of the pros and cons of a consolidation loan:

The Pros :

• A consolidation loan is likely to reduce your monthly payments.


• A consolidation loan can take the pressure off from existing creditors quickly.


• A consolidation loan can be used to pay off debts such as council tax arrears that can not be included into an informal arrangement like a debt management programme.

The Cons:

• A consolidation loan can mean you repay more, but over a longer period.


• A consolidation loan may mean you are charged additional costs for setting up the loan.


• If secured against your home, a consolidation loan will mean your home maybe at risk if you are unable to make the repayments.


• Because you will have converted all your debts into one, you will be left with only one creditor, and this can make it difficult to negotiate future arrangements if you are forced to do so.

Remember, do not over commit yourself.

If you are in any doubt, take advice. Here at myIVA-Adviser.com we are able to advise on all debt solutions that are available. Call 0800 088 7503 to have a chat with on of our specialist advisers for free.

We have put together a great guide to assist you with surviving a debt problem. Its free to download, and is full of great tips too.

• Consolidation Loan
• General Debt Advice