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Tackling your debts

Giving your monthly budget some more room

Posted 08 August 2012

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If you're looking to make your debts easier to deal with and make your monthly budget a bit more flexible, debt consolidation could be the answer.

In the current climate, having even a small bit of flexibility with your monthly budget could make a big difference.

However, if you have debts to repay every month, on top of all your other important outgoings - from rent/mortgage and gas & electricity to food and medical bills - it's likely that your finances will already be stretched.

If you're in this position, and you want to give your budget a bit more room for your other costs, taking 10 minutes to speak to a financial adviser could help you find a way of taking some pressure off your bank balance.

One potential way of doing this is with a debt consolidation loan. As long as you're generally keeping on top of your debts well, consolidating your debts with a loan could help you to simplify your finances and arrange payments you can afford - freeing up a bit of extra room for your other costs.

You can find out more about debt consolidation on this page.

Here's how taking out a debt consolidation loan could help you:

You'll simplify the way you repay your debts


Repaying several different debts to various lenders every month could make life more difficult than it needs to be.

After all, they won't be the only payments you'll need to keep track of: what with things such as Council Tax, car insurance, phone bills, fuel costs and vets' bills to pay for too, there's a long list of expenses you'll be accounting for from month to month.

However, missing debt payments or making them late could lead to damage to your credit rating and other financial problems - which makes not falling behind with your payments very important.

One of the advantages of a debt consolidation loan is that your multiple debts will effectively be combined, giving you just one payment per month to budget for and keep track of - to just one lender. This alone could go a fair way to making your monthly finances easier to deal with.

You can find our article offering debt consolidation tips here.

You could arrange payments you can afford


Another upside of a debt consolidation loan is that you won't have to worry about paying more than you can reasonably afford every month.

If a loan like this is right for you, you'll be able to arrange payments you can afford. If you want to do everything you can to clear the loan in full sooner rather than later, you could arrange to make larger monthly payments, so you'll be able to bring forward the day you'll be able to declare yourself debt-free - and save yourself some money on interest payments too.

Or you may decide that you want to give your budget a bit more room for other expenses: for example, if you're trying to save up for home improvements or to replace the family car.

In this case, you could arrange to repay the loan over a longer period. Although you'll be paying interest for longer too - which could work out to be more costly in the long term - your monthly payments will be smaller, which should give your budget some more room.

Just be aware that securing a debt against your property (with a secured debt consolidation loan) could put your home at risk if you don't keep up with repayments. If you've been thinking about debt consolidation, you should get some advice from a professional before you go any further.

by Emily Bancroft

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.