I think this is a question that a lot of people might be asking themselves at the moment since everything, literally everything seems to be getting more and more expensive.
Inflation is at 5.4% compared to just over 1% a year ago, and it’s likely to go even higher – maybe 8% by Spring. The Bank of England raised interest rates to 0.75% last week to try and keep inflation down, but that was the third increase in three months and what we don’t seem to be seeing is the Banks passing on any of that rate increase to savers any time soon. We’re in the midst of a fuel crisis, with soaring prices and energy companies going bust and the Russian invasion of Ukraine has pushed the wholesale prices of oil and gas to the highest they have been in a long time.
I went to the petrol station to fill my car up today. It cost me £76.46… to fill up my 45 litre tank! It was actually painful handing over my debit card to pay for something that cost nearly £20 less only a couple of months ago. I was actually tempted to put it on my credit card, and at those rates I can see a lot of people not having any option but to do that, and end up getting themselves in to debt just to put fuel in their car to be able to go to work or buy food to feed their families! In fact, at these ever increasing rates I can see how it might get to a point where some people can’t even afford to go to work.
So with so much financial uncertainty at the moment, what is debt consolidation, and is now the time that you should be considering it?
Debt consolidation is the process of combining all your debts into one loan with a lower interest rate to bring your monthly payments down. Credit cards and store cards etc usually have high rates of interest that result in people only being able to pay off the minimum payment each month, thus increasing the length of time it takes to pay back the debt. By consolidating in to one single product, not only to you reduce your monthly outgoings to a more affordable level, but usually reduces the length of time it will take to become debt free (because a consolidation loan will have a clear end date, where a credit card/store card etc doesn’t).
So if you are thinking about debt consolidation, where should you start?
Well I’m not an expert, but I would start by understanding where all of your debt comes from. Add up all of your debts so that you know what the total figure is. You might not want to know the figure if you have a lot of debt and/or have been hiding from it for a long time, but this is the first step to taking back control.
Once you know the total debt figure you need to calculate how much that debt is costing you each month, which you can do by adding up all of the debt payments you make each and every month and once you have your total monthly expenditure on debts you’ll want to know how much interest you are paying on each of the debts. Remember the aim of debt consolidation is to save you money. If you have any debts on interest free, or a very low rate of interest it might be that consolidating those isn’t the right thing to do as they would end up costing you more in interest in the long run.
Click here to learn more about debt consolidation and whether it could be right for you.