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Ask the expert

Ask the expert - family and finance Q&A 

If you've got any financial questions, why not ask our resident experts for their advice?

We ask John Hughes, business leader for retail products at
The Co-operative Financial Services, to provide the answers...

Q. I’m worried about my debts and considering taking out a consolidation loan,
is this the best way of paying off my debts?

A. Debt can easily add up, and as you know, managing multiple debts can become complicated, especially if they are all with different lenders.

Firstly, I would recommend you talk to your existing lenders and ask for their advice. They will be able to explain how much you are paying and of course if there are easier ways to manage your payments.

In general, consolidation loans can be a good option for some people.  They involve taking out a single, new loan to pay off several existing debts and can help to structure your repayments into one manageable monthly payment.  You may also benefit from reduced monthly repayments, although this is often a result of extending the term of borrowing.  A reduced rate may also be available, for example if your existing borrowing is currently held on credit or store cards.

However, although these loans appear to take the confusion out of having debts in several places, they may not always offer the best deal.  So it is important to shop around, remembering loans can vary widely and you may end up paying more overall including paying extra charges for setting up and repaying the loan over a longer term.

Similarly, if you have a poor credit rating, this may affect the interest rate offered to you.  A consolidation loan can look like an easy way out, but make sure you understand completely what consolidating your loans would mean for you, as ‘easy’ doesn’t necessarily equate to ‘cheaper’.

If you do need further help, organisations such as the Consumer Credit Counselling Service, the Citizens Advice Bureau, and the National Debtline will be able to provide a range of support and advice.


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