Suddenly, there is one bill to deal with instead of many, so someone might think, 'What harm will one more debt do?' But, of course, it's a slippery slope.
(PRWEB) April 16, 2006
The Debt Help Site warns that debt consolidation is not always an effective solution when dealing with personal debt problems.
Debt is a growing problem in the UK and debt consolidation, whereby multiple debts are replaced by one larger debt to cover them all, is a common first step in managing a debt problem.
However, the Debt Help Site warns that debt consolidation can actually make debt problems worse if the terms of the agreement are not looked at carefully enough.
Terry Galvin, editor of the Debt Help Site, explains: "Debt consolidation can seem like a good idea and often it is, because it is easier to deal with one debt rather than pay lots of different bills every month and deal with lots of different creditors.
"But many people with debts jump into an agreement because of this without looking into how much they are actually paying for the privilege. There's nothing wrong with consolidating debt when the overall interest or final payment total is reduced, but this isn't always the case."
Galvin adds: "Unfortunately, many people with debt problems have made their situation worse with debt consolidation by signing up to an agreement that charges more interest than is being paid for all the individual debts combined. Sometimes the term of the loan is longer, which means it is more expensive in the long run."
Another factor, says Galvin, is that turning multiple debts into one debt can wrongly be seen as a green light to take out more loans or credit cards.
He says: "Suddenly, there is one bill to deal with instead of many, so someone might think, 'What harm will one more debt do?' But, of course, it's a slippery slope."
With this in mind, the Debt Help Site urges anyone considering debt consolidation to seek professional advice on their situation to find out if the deal makes financial sense and to see if there is a more suitable solution for their debt problem.
For more on UK debt and debt consolidation, visit http://www.debthelpsite.net
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