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Is more loan credit the answer to your debts?

Finding away of getting your debt under control is a difficult decision in the current climate. There are so many different solution to think about and which one is the right one for you? Their are debt management plans, FSA’s (Formal Scheme of Arrangement) loan consolidation, or just get yourself a more loan credit to cover everything, but is the latter a good idea?

If you were to apply for a new loan of around €20,000 to try and cover debts of around € 19,000 does sound like a simple answer to a large debt problem.

The first problem you might find is that the loan company may refuse your application due to the amount of debt you already have. If you already have a large amount of debt to your name, loan companies will not give you a loan due to that reason. Most loan application forms do ask if you have any outstanding debt.

Getting a loan while owing money out to credit cards, bank overdrafts, other loans etc, is also just adding to the debt, making a bigger hole to try and dig yourself out of. Like we said earlier getting a loan for €20,000 to cover debts of around €19,000 might sound a like good solution but having that sort of money in your account does get very temping and we hear of people doing exactly this, and then spending a large amount of the loan on purchasing other items and eventually making things alot worse. Before you know it the loan you got to pay off your debt is now apart of your debt.

You can actually use the loan to pay off some of the lower debt amounts then that would clear off some of the creditors you owe. The problems with this is if you have lent around €20,000 at 10,75% APR means you are still paying back €22,150. So an extra €2,150 to pay back.

So is more loan credit the answer to your debt?