What is a Debt Consolidation Loan?
Debt consolidation loans
A debt consolidation loan could be an ideal solution if you want to turn debts with multiple creditors into one simple payment. By borrowing enough money to pay off the debts you owe now, you will only have to repay one lender. This could make your life a lot simpler. Find out more about your debt consolidation loan here.Get My Loan
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.
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What does a debt consolidation loan do?
By taking out a debt consolidation loan which covers all your outstanding debts, you’ll hopefully only have to pay back one creditor at the end of every month. This brings everything you owe into one place and can help to alleviate the stress from having multiple lenders chasing you. As well as this, the loan could help reduce the amount you pay each month.
However, before making your application it’s important you have a good understanding of the different consolidation loan types and the circumstances when it is the best solution. Debt consolidation loans have two forms, secured and unsecured:
This is when a loan is fixed against an asset, usually your home. By securing your property on the loan you are more likely to be accepted. However, if you fall behind on payments you could risk losing your home.
An unsecured loan is when you don’t have to offer your home, or any other asset, as security. However, you may also have to pay more interest on this loan than you would if it was secured.
What debts can be consolidated?
Debt consolidation loans cover a wide variety of expenses. For example:
- Personal loans
- Store cards
- Credit cards
- Short term loans
- Utility arrears
- Phone arrears
This list is not exhaustive. If you’re concerned about a type of debt which isn’t here, you should contact us. Chances are, we might be able to do something about it.
Is a consolidation loan right for me?
To understand whether a consolidation loan is right for you, you should fit the following criteria:
- You’re struggling to make ends meet due to debts from multiple creditors.
- You have a steady and stable source of income which provides enough to make the repayments.
- The loan would work out as better value than your current situation.
For more information, take a look at our guide: ‘When is debt consolidation worth it?’
If you still think a consolidation loan could be right for you, then our trusted partners can provide amounts up to £75,000 and will consider all credit scores. Our application form is simple and you won’t pay any upfront fees.
When a consolidation loan isn’t right
Whether or not a debt consolidation loan is the right decision depends entirely on your situation. If the following applies to you then this solution may not be the best choice:
- You can’t afford any sort of monthly loan repayment.
- You don’t clear all your debts with the loan.
- You end up paying more overall because the monthly repayments are higher or the term of the agreement is longer.
Debt consolidation loans for people with bad credit
If you have bad credit, some companies may reject your debt consolidation loan application. We work with a panel of lenders that will consider customer in a range of circumstances.
However, to get the best interest rates on your loan, you will generally need a good credit score. As a result you may have to pay higher interest rates than other customers.
Considerations of debt consolidation
Although debt consolidation has several advantages, it does have some negatives. For example:
- Debts are not written off and must be repaid in full.
- There are interest rates associated with the loan – these charges are not frozen.
- If you don’t keep up with the loan repayments, although you should have time to rectify this, this could result in legal action.
- Depending on the terms you’ve selected, it may take longer to repay your debts than would have otherwise been the case. However, you should be in a better financial state.
At Consolidation Express, we want to help where we can and – regardless of your credit history – we promise your application will get treated with the respect it deserves. After running our standard checks on affordability, if we believe that a loan is the best solution for you then we will try our best to get this granted. Only one way to find out though, apply and we’ll get the ball rolling!
Taking out debt consolidation loans for bad credit can be a good way to improve your credit report. There are plenty of loan places for bad credit available to support people in improving their rating to increase their chances of getting credit in the future. However, your rating will usually initially worsen as you’re taking out a new line of credit. Eventually though, your credit score should improve as you make regular payments on time. Furthermore, as your credit utilisation ratio decreases and the number of creditors shrinks, you should also start to see improvements in your credit rating.
It is important to monitor your credit score when searching for the cheapest debt consolidation loan that’s available to you. This is because your credit score affects the interest you will pay. In some cases, you may be offered a high interest rate on your debt consolidation loan which will increase your overall repayment total.
There are many other solutions to a debt consolidation loan so don’t worry if you’re undecided. When you apply, an advisor will take a look at your circumstances and might suggest an alternative. One which might be better suited to your needs.
Government debt consolidation loans do not exist. Debt management companies have been adopting phrases such as ‘government debt consolidation’ or ‘government debt advice’ which implies that the government approve of this kind of loan. However, this is never the case and the Financial Conduct Authority are working hard to clamp down on this kind of behaviour.