Debt Consolidation Frequently Asked Questions

Here are the questions that consumers frequently ask Jubilee Debt Management professionals regarding debt consolidation.

We have provided the answers to them to increase your knowledge about the topic. Read this information carefully and if you still have questions about debt consolidation, contact us because we would be happy to answer them.

What does debt consolidation involve?

Debt consolidation is a way to repay existing unsecured debts using a remortgage or a loan that is large enough to repay all these debts in full.

Why would people want to consolidate their debts?

People choose to consolidate their debts for several reasons. Reducing monthly debt payments through consolidation can increase disposable income, making it easier to afford the current lifestyle. Debt consolidation can also simplify household finances. People with multiple debts often find it difficult to stay on top of financial matters.

This can lead to late or missed payments, which may result in additional charges, increased interest rates, declining credit scores, and legal issues.

How does debt consolidation decrease monthly debt payments?

Debt consolidation lowers monthly payments for debts in two ways. It allows an individual to extend the repayment period for debt. Since the debt will be repaid over a longer time, each of the debt payments will be less. Keep in mind that owing money for a longer period means that interest must be paid for a longer time, which could result in paying more money over the long-term.

The second way that debt consolidation decreases monthly debt payments is by lowering interest rates for debts. Unsecured debts like credit cards and store cards usually carry a high rate of interest. By using a consolidation loan that has a lower interest rate, an individual may reduce monthly payments, based on how quickly the consolidation loan will be repaid.

If I am not a homeowner, can I still use debt consolidation?

Yes. People who do not own property or who do not want to borrow against their property may qualify for an unsecured debt consolidation loan. This loan usually has a higher interest rate than a loan that is secured. This may make it difficult to find an unsecured consolidation loan that features an excellent interest rate. However, monthly payments may still be reduced by extending the debt repayment period.

Are there any negative aspects of debt consolidation?

Yes, there are some drawbacks to using debt consolidation. This approach may end up costing more due to the interest that accrues during the extended repayment period. In addition, when debt consolidation is used for debt management, an individual may incur new debts as existing debts are being repaid.

People who are unsure whether they are financially responsible or wealthy enough to handle this situation should carefully consider debt consolidation before making a decision to pursue it.

How does a debt consolidation mortgage differ from a debt consolidation loan?

A debt consolidation mortgage is a new mortgage that is large enough to pay off both the existing mortgage and all unsecured debts. When a debt consolidation mortgage is used, the individual makes only one payment each month, representing the mortgage payment.

An unsecured or secured debt consolidation loan is large enough to repay unsecured debts. The loan proceeds are used to repay the original debts and the individual begins making monthly payments toward the loan. Rent or mortgage payments are not affected by a debt consolidation loan and must continue to be made.