If you’re struggling to juggle several debts you may consider a debt consolidation loan.
A debt consolidation loan could allow you to reduce several payments into one fixed monthly payment.
Does debt consolidation affect your credit score?It’s possible a debt consolidation loan will lower your credit score in the short term, but it will improve your credit long-term if it’s used to repay debt.
Put simple a debt consolidation loan is a way of consolidating debts.
It means that instead of paying several monthly payments you’ll have a single monthly payment that will cover all the debts owed.
There are two types of debt consolidation loan – secured debt consolidation loans and unsecured debt consolidation loans. It’s important to be aware of the differences between the two before you decide which one is right for you.
A secured debt consolidation loan is taken out against an asset of value, such as a home, while an unsecured debt consolidation loan isn’t. If you fail to stay on top of monthly repayment of a secured loan you risk losing your home so it’s important to take this into consideration.
Debt consolidation loans are a way of managing existing debts but do come with a cost attached.
The loan amount will need to cover the overall cost of your debt and then there will be additional costs to consider. These include:
Debt consolidation loans are available to people who have a bad credit score.
In fact, the people who often benefit from debt consolidation loans the most are the people who owe money to a number of different creditors.
If you owe money to debts such as credit cards, overdrafts, a personal loan or to the bank you may consider a consolidation loan to ease the burden of multiple monthly payments.
You should be aware, however, that while you can access debt consolidation loans with a poor credit score the likelihood is you’ll be faced with a higher interest rate on the repayments to be made.
It’s important to make sure that you’re aware of any costs attached to a debt consolidation loans to avoid any further financial stress. Remember, there are no government schemes that offer you debt consolidation loans and there will likely be no loans that are interest free.
If you’re unsure about a lender, always check the financial services register number to ensure it is regulated by the Financial Conduct Authority (FCA).
It’s important to make sure that you’re aware of any costs attached to a debt consolidation loans to avoid any further financial stress.
Applying for a debt consolidation loan is simple. Here we offer a guide to help you find the right loan for you.
Don’t get caught out with the first loan you come across.
Be sure to sop around to find the consolidation loan with the best representative APR and low interest rate. You should also check for the best loan repayment plans.
It’s important to check your budget to ensure you’ll be able to cover the cost of the loan amount, although this shouldn’t too much of a hardship as you consolidate several payments into one monthly repayment.
Make use of comparison sites to help find the best consolidation loan deals.
Once you’ve found the debt consolidation loan you’re interested in, you must submit your application.
You can apply online or in person if applying through a bank. You’ll be asked for financial information such as details of your income and expenditure and maybe asked to share your bank statements to prove your affordability.
If you apply online you may get your result straight away or you may need to wait a few days to discover if your application has been approved.
If your consolidation loan is approved you’ll consolidate debt and begin repaying through one affordable monthly payment.
What you pay with the new loan depends on your personal circumstances. Whether you’re worried about existing debts such as credit card debt or a personal loan, you can repay with a fixed monthly payments.
It’s best to tackle the debts that worry you the most first, this can help stop action creditors may be trying to take against you and can stop interest rates rising on the original debts.
A debt consolidation loan lets you repay existing debts in much more streamlined manner – paying just one loan instead of several.
It was literally the best decision of my life, and it has actually changed my life, cheesy as that sounds, it has changed my life.
Paige , IVA Customer
Debt consolidation loans can affect your credit score in both positive and negative ways.
If you’re concerned that your financial circumstances are spiralling out of control it’s important to seek support as soon as possible.
While a debt consolidation loan might seem like the best way to deal with existing debts it’s important to be aware of all the debt solutions available to you. Contact Your Debt Expert today for debt advice on 0800 082 8086.