27/04/2020
Debt Consolidation Loans Explained.
Debt consolidation loans are used to combine your outstanding credit commitments into one manageable payment plan, potentially making it easier to take back control of your finances. Borrowing money in this way means you have one single payment each month, potentially lowering monthly repayments and making it easier to keep track of what you owe and who you need to pay. However, before applying for a debt consolidation loan, it is important to thoroughly research your options ,ensure your borrowing will be affordable and always check how this type of borrowing will impact your interest payments and credit score
What is a debt consolidation loan?
A debt consolidation loan is when you take out a new personal loan to repay all, or some, outstanding debts through a single monthly repayment. You can use it to pay off debt for:
• Credit cards
• Store cards
• Personal loans
• Vehicle Finance
Although your debts would not disappear, merging them into one personal loan could reduce your monthly outgoings and help you better manage your money – as long as you can afford the repayments.
How do debt consolidation loans work?
With a debt consolidation loan, you move all your borrowing, or a significant chunk of it, from a variety of locations onto a single loan. Rather than making lots of separate payments to different lenders every month, you will only have to pay your consolidation loan provider.
With each separate existing loan, you look to pay off with your consolidation loan, check whether there are any early repayment charges – and, if so, factor them into your calculations.
Most debt consolidation loans are unsecured, which means they are issued according to your creditworthiness. If you have bad credit, you may find it hard to get an unsecured loan and you might want to consider loans for poor credit instead.
If you see any loans that are secured, you should be wary of them. A secured loan is when the debt is held against an asset (usually property) .These loans are used mostly to consolidate large personal or business debts.Think carefully before securing other debts against your home because your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
Is a debt consolidation loan for you?
Advantages of debt consolidation loans:
Taking out a debt consolidation loan saves you juggling several individual repayments. They can sometimes mean you pay less than short-term loans and are easier to monitor than credit card debts, which have changing interest-free periods.
Disadvantages of debt consolidation loans:
In some cases, debt consolidation loans will not reduce your repayments entirely, as it depends on how much you are currently repaying and over what period. They cannot erase your debts entirely and should not be taken out as a form of debt relief or settlement.
Debt consolidation loans can also mean you end up paying more overall than your previous individual repayments if you choose a longer loan repayment period.
Before applying for a debt consolidation loan, it is important to consider whether you can afford one larger monthly payment, as well as ensuring you don’t fall further into debt.
Applying for a debt consolidation loan
Before you start a debt consolidation loan application, it is essential you consider your monthly income, outgoings and existing debts. Take time to consider whether you can afford to make regular repayments with this type of loan.
Calculate how much you are already repaying for current loans and ensure it tallies with the new repayment structure of your debt consolidation loan. This will help you decide whether combining your credit into a single repayment will help your financial situation.
What do I need to apply for a debt consolidation loan?
When you start an application by submitting your details , our team will be in touch over the phone to talk through a few details. We will ask for further information about you like:
• Name and address
• Employment status
• Details of your income
We will also discuss your current situation and the existing debts you have. This is in order to provide you with the best loan for you.
Before you get started, make sure you have those outstanding amounts, repayment period, monthly payments and current interest rates to hand. This will help us understand exactly what you are paying out and whether a debt consolidation loan would lower your monthly repayment amount.
Finding the right debt consolidation loan for you
There are lots of different loans to choose from if you are looking to consolidate your debts. We can help you to find the right lender for your needs
Most of our lenders performs a soft search, which means there will be no record of the search on your credit report. It allows them to use your personal circumstances to see your eligibility for loans – but this is not a guarantee of acceptance and should be used as a guide only.
We can help to arrange consolidation Loans for personal and business customers alike.
GB Financial Group is a credit broker not a lender. We never take a fee from personal customers for this broking service. There may be a fee applicable to business customers. Please note that loans are only available to the UK nationals only
