Scottish debt consolidation
Scottish debt consolidation entails taking out one loan to pay back many other loans. This is often undertaken to secure a lower interest rate, obtain a determined interest value or for the consolation of servicing only one loan.
Scottish debt consolidation can simply be from a number of unsecured loans into another unsecured loan, but more often it involves a secured loan against an asset that serves as guarantee, most commonly a abode. In this case, a bank loan is secured against the house. The collateralization of the loan allows a lower interest quote than without it, because by collateralizing, the asset possessor agrees to allow the forced trade (foreclosure) of the asset to pay back the loan. The risk to the lender is reduced so the interest rate offered is lower.
Sometimes, Scottish debt consolidation companies can discount the amount of the loan. When the debtor is in chance of personal bankruptcy, the debt consolidator will buy the loan at a discount. A prudent debtor can shop around for consolidators who will pass along some of the savings. Consolidation can affect the ability of the debtor to discharge money owed in insolvency, so the decision to consolidate must be weighed carefully.
Scottish debt consolidation is often advisable in theory when someone is paying credit card debt. Credit cards can carry a much larger interest rate than even an unsecured loan from a bank. Debtors with property such as a home or office or car may get a lower rate through a secured loan using their property as collateral. Then the whole interest and the final cash flow paid towards the debt is lower allowing the debt to be paid off sooner, incurring less interest.
Scottish debt consolidation
In Scotland Student Loan entitlements are guaranteed, and are recovered using a means-tested application from the student’s impending salary. Student Loans in Scotland cannot be included in Bankruptcy, but do not affect a person’s credit rating because the repayments are recovered from the students future salary at source by the employer before any income is paid, similar to Income Tax and National Insurance contributions. Many students however, are struggling with debt well after their courses have concluded.
The level of individual debt in Scotland has also risen astonishingly in recent years:
"Total UK private debt at the end of February 2008 stood at £1,421bn. The growth rate went up to 8.9% for the preceding 12 months which equates to an improvement of £111bn.
Scottish debt consolidation Concerns
In the latest years, studies in the social media have raised fears about the use of consolidation loans. The concern is that many people are persuaded to consolidate unsecured debt into secured debt, usually secured against their house. Although the monthly payments can often be lower, the total amount repaid is often immensely bigger due to the long time period of the loan. Scottish debt consolidation sometimes only treats the signs and symptoms of debt and does not handle the root problem. In some examplesin Scotland, snowballing fees may be a better remedy.
Alternatives to Scottish debt consolidation
Other options available to overburdened debtors include credit counselling, debt settlement and personal bankruptcy. Some assistance money lenders will renegotiate with the lenders on the debtor's behalf, as a trust counsellor does.