According to Shadow Chancellor John McDonnell, the UK is in the grip of a mounting debt crisis.
More specifically, Labour’s detailed analysis reported that unsecured borrowing rose to more than £14,000 per household this year, while McDonnell himself suggested that this figure could increase to a staggering £19,000 by the end of parliament.
The use of multiple loans is at the heart of the issue, as customers continue to borrow more to fund their lifestyle. In this post, we’ll explain why this is a bad idea and consider some viable alternatives.
Why are Multiple Loans so Damaging?
The biggest issue with taking out multiple loans is the associated interest repayments, which can rapidly scale out of control without careful management.
Even when making the minimum monthly repayment on a single loan, you’ll often find that you’re simply combating the cost of interest rather than eating into your original debt. If you multiply this issue across a number of loans, it’s easy to see how you can investment large sums into settling your debts without ever coming close to achieving this goal.
In instances where interest payments grow out of control, you’ll also run the risk of missing monthly repayments and succumbing to the strain of unmanageable debts.
At the same time, attempting to manage multiple loans can be extremely challenging, particularly when you have monthly repayments dotted throughout the month. While you can try to align your payment dates, of course, the process of attempting to manage your loans while also balancing your monthly budget can become almost impossible when dealing with a minimal amount of time or disposable income.
Why Debt Consolidation may be the Answer
A potential solution to this issue may exist in the form of debt consolidation, which may initially seem like a counter-intuitive option as it involved taking out a brand new loan. However, the idea is to borrow an amount that covers your existing debt, with this capital being used to pay off your numerous liabilities and settle individual, unsecured loans.
In essence, this is the process of combining multiple debts into a single, larger liability, which is easier to manage and subject to just one monthly repayment.
This type of product, which is available through service providers such as Likely Loans, offers immediate advantages to households. While it should not be considered as a way of reducing the value of your debt, it does enable you to consolidate your borrowings and simplify the process of repaying your liability.
At the same time, you’ll also be able to access a consistent and often competitive interest rate, which makes it far easier to track your debt and manage your total monthly outgoings.
So, as long as you take the time to understand how consolidation loans work and the demands that they place on you, they can represent an extremely effective way of bringing your existing debt under control.
For more articles on debt check out the Debt Archives
You must log in to post a comment.