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Bankruptcy or Debt Consolidation?

You may feel that bankruptcy is the only option available. However, for many, a debt consolidation loan could be a better alternative.
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Got multiple creditors demanding money from you? Debts spiralling out of control? Don’t see a way to pay what you owe? In this situation you may feel that bankruptcy is the only option available. However, there are other debt solutions. For many, a debt consolidation loan could be a better alternative.

Read on and we’ll explain why a debt consolidation loan to consolidate debt could be the best option.

What is bankruptcy?

Bankruptcy is often considered a fresh start to your finances. Once you apply for this option, creditors won’t be able to take action against you, and much of what you owe should be written off. However, it does have serious consequences. For example, many of your assets and finances will be divided up and sold to raise as much money as possible for your creditors.

As a result, under bankruptcy, you could lose your home, possessions, or business.

Furthermore, details of your bankruptcy will be made public and your credit rating will be severely affected – possibly beyond repair for the foreseeable future. As a result, you will find it difficult to obtain loans or other financial products.

Arguably, bankruptcy should only be considered if you have no hope of repaying what you owe and no other options are available.

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Is debt consolidation an alternative to bankruptcy?

If you are unsure whether to apply for bankruptcy and want a debt solution which doesn’t have the consequences of bankruptcy – and keeps your assets secure – then a debt consolidation loan could be a good option.

A debt consolidation provider will provide you with a debt consolidation loan, which is the funds you need to repay all your lenders. Then you just have one monthly payment to make. This arguably is far better than managing multiple debts to creditors.

There are few cases where a debt consolidation loan wouldn’t be better for your financial – or long-term – situation than bankruptcy. However, it’s important to note that – fundamentally – this is a loan. As a result, repayments must be made. Therefore, a debt consolidation loan could be a great option when you have some money available to repay your lenders as a monthly payment.

Apply for a Consolidation Loan

Can I get a debt consolidation loan?

The monthly payment for a debt consolidation loan will depend on your circumstances and there will be representative APR interest, however, our application service considers people with all credit scores so you can still apply if you have bad credit.

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Bankruptcy or debt consolidation loan?

As bankruptcy should be considered a ‘last resort’, a debt consolidation loan may usually be the better option. When choosing between these two solutions, you should ask yourself if you can afford to make a monthly payment towards your creditors.

If the answer is yes (or could be yes once you’ve repaid your creditors) then you should consider a debt consolidation loan.

As bankruptcy can drastically affect your life, it’s may be worth obtaining professional debt advice before committing to this.

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APRs from 5.8% to 89.9%

We are a broker, not a lender.

Unsecured Loan Representative 69.9% APR

Borrowing £7,500 over 36 months, repaying £502 per month, total repayable £18,083. Total cost of credit £10,583. Interest rate 69.9% (variable). The lenders on our panel offer loans for 12-60 months, with rates from 5.8% APR to 89.9% APR. The Representative Example is based on all loans paid out by lenders between 19th Apr 2022 and 23rd Dec 2022.

Secured Representative 11.7% APR

If you choose to add fees to the loan: Assumed borrowing of £25,000 over 120 months, plus a broker fee of £2,500 and a lender fee of £250 would result in monthly repayments of £345.55, the borrowing rate is 8.6% (variable), the APRC is 11.7% (variable), total charge for credit £16,466.00 and the total amount payable £41,466.00. You can opt to pay the lender and/or broker fees upfront, your adviser will discuss these options with you.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it. All rates vary subject to loan amount, loan type and status. Repaying your debt over a longer period of time may increase the amount you pay.

Further reading

What are the Different Kinds of Unsecured Loans?

Understand what an unsecured loan is, and how best to use the different kinds of unsecured loans in 2023.

What are the Different Types of Secured Loans?

With so many different types of loans available, it can be difficult to know which is right for you. For more information on secured loans, read this expert article.

Persistent Debt – What Does it Mean for Your Credit?

Persistent debt can affect your credit rating for a significant time period. Read to find out more.