Debt consolidation in the UK is the process where a debtor takes out a single loan to pay off other existing loans, debt free consolidation This can be done to secure a lower interest rate, and hence make lower monthly repayments, or to just to simplify your repayment plans. Unlike debt management, where your previous debts are not cleared, a debt consolidation loan clears old previous debts, once and for all. Debt consolidation takes a number of forms; either as the conversion of multiple unsecured loans into a new, unsecured loan, or debts can be consolidated into a secured loan against an asset, most often a property, which be used as collateral. Because a secured loan offers less risk to the creditor, the interest rate can be lower, and hence a consolidated loan can be cheaper. The risk to you the debtor is that you could lose your home if you fail to keep up repayments. For most people in the UK, debt consolidation offers advantages to people with high levels of credit card debt because at the present time credit card interest rates in the UK are generally higher than those offered by the banks. Other groups that would benefit from debt consolidation are individuals with high levels of debt against high street store cards, of which there have been some 14 million issued in the UK, with an average APR of about 30%. In a recent report by the UK Competition Commission ("Store Card Credit Services", September 2005), it was claimed that many shoppers were paying inflated interest rates on their chargecards and being overcharged by ? 100 million each year.

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