Most people have taken out plenty of loans and other forms of credit, from various sources over the years. These could include student loans, credit cards, store cards, a bank overdraft, car loan, goods bought on a buy now pay later basis. All of these sources of credit will have different terms depending on who you borrowed from and how much. One important factor with all these loans is that they will all have different rates.

The rate you repay your loans at is vitally important. Many people underestimate the influence the APR will have on how much they repay for a loan; the difference can be astounding. The bottom line is that you want your interest rates to be as low as possible.

If you have many different loans and they are all at different rates, and some of the rates are very high, you may consider debt consolidation. This is taking out a new loan that will provide you with enough cash to pay back all your other loans. Then the only loan you have to worry about is the new debt consolidation loan. The main advantage of this is that you may be able to borrow the consolidating loan at an interest rate substantially lower than what you’re paying for your other loans. This will mean that all your monthly payments will be replaced by one reduced payment, thus saving you thousands.

Another advantage of debt consolidation is the stress it can take off your shoulders. It is sometimes very difficult to keep track of all your various payments, when they’re due, how much they’ll be and whether or not you’ll have enough to cover them. This may lead to you frequently missing payments and incurring further late fees. A debt consolidation loan will remove all this hassle, as you will now only have one loan to repay.

The main drawback of a debt consolidation loan is that the new loan is likely to be secured over your home. While your other loans will likely have been on an unsecured basis, you will be making them secured over your home. If there is a chance that you will not be able to meet the repayments, then you are putting your home at risk. This is highly unadvisable. Unsecured creditors can ultimately make you bankrupt and take your home but the process is lengthy and can often be avoided. If the loan is secured there is a much greater risk that your home will be taken to pay off the loan.