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No matter which way you look at it, the word debt seems to strike fear in the hearts of many people, and none more so than children of the 60’s.
For some reason, the older generation sees being in debt as a tad shameful and something to be avoided at all costs. As if to give themselves some moral high ground, I’ve often heard mature people proclaim ‘I don’t owe anybody anything’.
But is that something to be proud of, or, could it indicate that you’ve denied yourself some luxuries, or not enjoyed your life as much as you might have otherwise if you’d taken out a loan, however large or small to live more comfortably or to help your family perhaps.
But despite your best intentions, what happens if, in later life, you do find yourself with a few different loans which are all incurring interest, and are in fact causing you some worries.
Most Important – Don’t Worry!
If you are living life to the full it’s likely you may have invested in a motorhome, or a new car to enjoy during your retirement. You may have kindly helped your children with a deposit for a house or supported a Grandchild or two through University. You may have enjoyed some long-haul holidays courtesy of your credit card, or revamped your home or garden. All these things cost money and are things over and above the cost of day-to-day living.
Sometimes all of a sudden you decide to take a look at your finances and realise that you have 3 or 4 outstanding loans which are all incurring interest at an alarming rate.
To alleviate some of your concerns, it could be time to consider if debt consolidation might help you.
How does Debt Consolidation work
Quite simply, you replace all of your outstanding loans, such as credit cards, car finance, house improvements, with just one loan, and one interest rate. Very often this can be at a lower interest rate than the ones you are already paying. It tidies up your outgoings and is more manageable than having your money going out to so many different organisations.
Secured or Unsecured Terms
There are two types of consolidation loans, secured and unsecured. If you choose secured, the loan will be offset against your home and will take into account the amount of equity you have in it. The interest rate for this type of loan can be lower as the lender knows it is exactly that – secured. But don’t forget any loan secured against your property immediately puts your home at risk, you must be sure you can meet the monthly payments for the length of the loan term.
An unsecured loan is riskier for the finance company as the security is merely backed by your promise to repay it, thus the interest rate could be higher. Things to consider here are that if you fail to pay back the loan or miss a monthly payment, your credit score will be affected. Before taking out an unsecured loan make sure it works for you.
When Debt Consolidation is NOT the right choice
If you are already having difficulty meeting the monthly payments of your outstanding loans, having them all under one roof, so to speak, really won’t make much difference unless you manage to fix a considerably lower interest rate. You will still owe the money, and you will still have to pay it back, but just to one lender, instead of maybe 3 or 4, and let’s face it, in later life the opportunities to earn extra money diminish by the year!
No matter how old you are, if you are already struggling, then you need to seek a different kind of solution and talk to a debt counsellor, or your local Citizens Advice office.