- Debt consolidation loans can save money!
- Getting free debt advice
- When can a personal loan help to repay debts?
- Can you get a bad credit consolidation loan?
- Watch out for these charges
- How to find the right personal loan for you
Having lots of different debts may mean that you are unable to cope with the large number of different payments due each month. Consolidation loans are a means of putting all the debts together (consolidating them) and these loans can work if the total amount payable each month is lower than you are currently paying. In this article, we explain what your options are when you’re struggling with debt and whether a debt consolidation loan is the right thing for you.
Debt Consolidation Loans UK
Lenders will often advertise taking out an cheap instant personal loans as the solution to paying off existing debts. If you are having a problem keeping up with many different monthly repayments, you may find this a tempting offer. If this is something that you are considering, there are some important factors to think about before you make an application for one of the loans for debt consolidation.
Unsecured Debt Consolidation Loans
Lenders offer both unsecured and secured loans for debt consolidation in the UK. An unsecured loan means that the lender has no claim to any of your assets should you default on the repayments. A secured loan means that the money you borrow is secured against your assets (usually your home). Failure to repay a secured loan can mean your home might be repossessed.
If you are struggling to keep up with the monthly repayments for one or a number of debts, then before you take the step of borrowing more money, get some financial advice. You do not have to pay for this advice; although there are some companies who will charge you, there are several charities who are happy to advise you for free. Here is a list of UK debt advice charities and their websites:
|Christians Against Poverty||https://capuk.org/|
|Debt Advice Foundation||http://www.debtadvicefoundation.org/|
|Debt Support Trust||http://www.debtsupporttrust.org.uk/|
Getting Free Advice About Debt
Debt advice is available from a variety of places including the Citizens Advice Bureau and debt charities like StepChange. There are also many money advice websites with excellent links to pages that offer free advice about debt.
Many people, often due to an unforeseen change in circumstances, can find themselves swamped by the amount of money that needs to be paid out each month. Most will look at different ways to stem the tide and decide to turn to more borrowing in order to cope with total monthly outgoings.
Asking for help from professionals is an excellent idea. Experts are there to give advice and to find the best solution to your financial problems. This could be finding best personal loans rates online that will enable you to consolidate your debts to a more manageable amount each month. Experts might recommend another choice like an Individual Voluntary Arrangement with all lenders or some other option.
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Borrowing money to repay your loans is usually a bad idea. So what exactly is debt consolidation, and what makes it a good option?
How To Get Out of Debt
Taking out a personal loan to consolidate debts can help if:
- the interest rate is lower and
- the total amount repayable is the same or less than that of your existing debt agreements.
Similarly, a loan like this can only be of benefit if you are sure you can make the repayments in full and on time.
Taking out a personal loan to pay off debts can be advantageous but only if you take the opportunity to change your lifestyle and attitude towards borrowing. Cutting back on spending is one choice that will help you to keep on track.
Tip: Cut up credit cards and to ask the bank to cancel any agreed overdraft limits. This will help to stop the temptation to spend on non essentials
If you are using a credit card to pay off regular household bills, your finances will need a bit more work than a debt consolidation loan. You should always get debt advice before taking on consolidating loans to pay off debts.
Debt Consolidation Loans Rates
Shop around for the best personal loan debt consolidation deal by using comparison websites and do not just look at the advertised headline interest rate. Remember, the APR of low APR pre-approved personal loans often goes up when you actually apply. Use APR to compare rates as this figure includes any arrangement fees.
It is important to look at whether there is a set up fee for taking out the new personal loan, as this will impact your calculations about whether a debt consolidation loan is worth it for you.
Even if you do find a debt consolidation personal loan that works out cheaper than your current debts, there is still something important to find out: will you be charged an early repayment fee from any of your existing lenders? Some lenders will make you pay a penalty for closing a loan early, pushing up the total cost of your debt consolidation loan.
Debt Consolidation Loans Bad Credit
If you have a poor credit record due to missed or late payments for existing loans or because of unpaid utility bills, the lender may require security for debt consolidation loans. Once again it is important to stress that getting debt advice is essential before taking on any loan that is secured on your home.
Taking on debt to consolidate loans can be very tempting especially as it will get creditors off your back. If you are constantly receiving letters from collection agencies or consolidation lenders this might look like the best way to get rid of the immediate problem. However, if, due to a poor credit record or other factors, you are offered an online bad credit personal loan at a higher rate of interest which means the monthly repayment is higher than at present, then it is not the right route to take.
Work out what you are currently paying. If the new payment is more then you clearly won’t be able to afford to pay off the loan even if you think you are buying some time. The same applies if the new loan is going to last for a longer term. The total amount repayable will add up to a lot more.
Things to Consider Before Taking Debt Consolidation Loans
You’ve done the maths, and you know that the monthly repayments of your debt consolidation loan will work out cheaper than your current repayments combined. There are still a few things that you should check before applying though:
|Make sure you consider…||Personal Loans Now|
|Borrowing Enough To Pay Off All Debts||An online consolidation loan is no use unless it pays off all your current debts and means you are paying the same or less each month. So, unless this is the case, get some expert advice about different solutions to your debt crisis.||Personal Loans Now offers loans of up to £25,000.|
|Extending The Term Of Your Debts||Although a personal loan for debt consolidation may mean that your monthly repayment is reduced in total, if the term of the loan lasts much longer then you could well end up paying a significant amount more than you currently owe.||At Personal Loans Now, we give you the total repayment sum, not just the monthly figures.|
|High Set Up Fees And Charges||Many lenders will offer consolidation loans to pay off debts but they may charge a high fee for arranging the loan and there could be clauses that specify extra charges if you pay off the loan at an earlier date.||Personal Loans Now don’t charge any arrangement or early repayment fees.|
Where Can I Find The Best Debt Consolidation Loans?
If you have taken advice and have decided to apply for a personal loan to pay off your existing debts, a good option is to use a comparison money website to find the best deal. Any headline rates should be thoroughly investigated as the APR might include a hidden set up fee. There may also be a difference in the APR offered if you are searching for a bad credit debt consolidation loan. If your current circumstances result in restricted borrowing limits, you will probably not have the ability to take out a large consolidation loan to pay off all your existing debts.
Equally important is to check the small print for early repayment charges. Although you may be currently struggling to make repayments, things can change quickly. An opportunity may arise that enables you to pay off the loan early. Therefore, it makes sense to have an agreement that does not make this a restriction or make onerous charges for doing so. A more flexible personal loan could work out cheaper in the long run. So, apply only to reputable and ethical lenders who do not charge an arrangement fee or extra interest for early repayment.
Debt Consolidation Loans
If you have many different debts, it may work out cheaper and easier for you to take out a debt consolidation personal loan to replace. We’ve discussed what you should look out for, including any early repayment fees, arrangement charges, and a higher than advertised APR, especially if you have bad credit. Low Interest secured homeowner personal loans are cheaper, but you run the risk of losing the house should you find yourself unable to pay. It’s always a good idea to discuss your financial situation with a debt advice charity before making any big moves.
Personal Loans Now has access to wide panel of direct lenders who may be able to offer you debt consolidation personal loans at a good price, helping you get your debts under control.