Will a debt consolidation loan be cheaper?

Friday, 31 July 2009 01:20

A reader from Norfolk is looking at a debt consolidation loan and wants to know if this will be the cheapest option.

Jo Crosse, Halifax and Bank of Scotland personal loans expert, tackles the problem.

Chris Winters from Kings Lynn asks:

I am considering getting a consolidation loan to pay off a store card, credit card and car loan.

Is this a good idea or will I end up paying more in the long run?

Jo replies:

Consolidating a number of debts could save you money and will also give the benefit of having just one monthly payment, making it easier to manage your finances.

The deciding factors will be the rate of interest you have to pay on the new loan and the term you are paying it back over. You need to compare this against what you currently pay and what you have left to repay, on all your other credit products combined.

You will also need to check if there are any penalties for repaying your car loan early. It may be better to consolidate your store and credit cards into one payment and leave the car loan separate.

If you have a question for Jo, go to the myfinances.co.uk Ask the Loans Expert section.

Or for more information on your loans options go to personal loans at Halifax.

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