You may consider getting a Debt Consolidation Loan if you have multiple debts and would like to pay them off together using a single loan.
Debt Consolidation Loans are great for people who have borrowed from various sources and are looking to get a handle on their finances whilst potentially making substantial savings on interest rates.
How Does a Debt Consolidation Loan Work?
Debt consolidation involves applying for a new, single loan product which combines your debts into one loan. The amount of money that you borrow must be enough to pay off the amount of money that you owe when all of your debts are combined.
The repayments are made monthly by the borrower to a single lender in a lump sum; therefore the interest paid is only on one transaction, rather than many.
Reduce the amount of interest you pay – cut your monthly outgoings
Pay off your debts in a single payment made monthly
No need to take out further loans
Borrow up to £5 million with Secured Loans
The incentive for taking out a Debt Consolidation Loan is that, even if you end up paying for an extended term, you may save on the amount of interest you pay. Interest rates on small loans (such as payday loans) are oftentimes higher than the rates on larger loans (such as a Debt Consolidation Loan). Getting a Debt Consolidation Loan may enable you to cut your monthly outgoings by reducing the amount of interest you pay.
Secured Debt Consolidation Loans
You will typically find that debt consolidation products take the form of secured loans, which are when the loan is secured against an asset. The asset is usually one’s home, which will then be used as collateral if the loan is not repaid.
Because the loan is secured against a property, the risk of lending is greatly reduced, which means that the rate of interest offered by the lender can be much more competitive.
Unsecured Debt Consolidation Loans
If you do not own a property, then you may still be able to get a Debt Consolidation Loan.
Student loans, credit card debts, and other loans can sometimes be combined into an unsecured product (where an asset is not used as collateral), although the interest rates will not be as competitive as with a secured loan.
Is a Debt Consolidation Loan Right for Me?
A Debt Consolidation Loan is a good option for you if you have a number of debts to repay (such as multiple credit cards), and are looking to repay them in a convenient monthly sum which may allow you to save on interest rates.
It is vital that you are able to make your monthly payments when applying for a Debt Consolidation Loan. You must also be aware that your repayment term may increase in length with a Debt Consolidation Loan.
You could be charged early repayment fees for having used a Debt Consolidation Loan to pay off your existing debts.
You may be eligible for a Secured Debt Consolidation Loan if you:
are over 18 years old
have a steady income – are able to make monthly payments
have a property or asset to use as collateral
Debt Consolidation Loans do not reduce the initial amount of debt that you owe, but they are able to make that debt more easily repayable by offering you improved repayment terms and lower interest charges.
If you have multiple debts, but a steady income and can expect to be able to make your monthly repayments on time, a Debt Consolidation Loan could be the beginning of the end to your financial difficulties.
Contact us for more information on Debt Consolidation Loans and how they can help you.
Your home may be repossessed if you fail to keep up with your repayments.