After many years of low interest rates, the banks are finally reversing the trend with base rate interest rates predicted to hit 6.5% by the end of 2007. While still quite low, economists fear that this just be start of the rises that could continue for the next 2 or 3 years.
With debt being cheap, the vast majority of the working population in the UK has some form of credit. While that's actually good for the economy, some forms of debt are bad if used unwisely. Anyone who's at home during the day or has been off work watching TV will have been bombarded with commercials advertising debt consolidation loans. But what are they? And are they are any good?
The answer depends on how much you owe and if you own a home. If you own a home there are some advantages to taking out a debt consolidation loan. The lender will be able to offer you a lower rate and a longer term. However, keep in mind that with a longer term you could end up paying more. Home owner loans start from £3000, but you unless you have poor credit you should only consider this option if you owe more than £10,000 as rates at the lower end can be extreme to cover the fees the lenders have to pay.
There are serious pitfalls to taking out a secured debt consolidation loan, if you can't meet the repayments than you could loose your home.
Tenants, or non-home owners can only apply for an unsecured loan. Rates will be higher as there is nothing for the lender to "insure" your payments against. In bother circumstances the lenders will ask that you close down credit cards and loans are part of the deal.
In a word yes. If you are committed to getting your finances in shape work through your options and see what deals are available to you.
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