Debt Consolidation Loans
What are Debt consolidation loans?
Debt consolidation loans are undoubtedly one of the most popular ways for UK consumers to manage their debts. Essentially, a debt consolidation loan allows the borrower to group a number of credit commitments together, providing the much sought after benefit of making just one repayment each month, to one credit provider, opposed to making many repayments each month, to many credit providers.
Who can use Debt consolidation loans?
Debt consolidation loans can be used by any UK resident, who's overall intention is to control a series of debts through one smaller, more manageable repayment. The most typical candidate for a debt consolidation loan will have at least one, or maybe all of the following: -
- Credit card debts
- Store card debts
- Catalogue debts
- Other outstanding loans
- Car finance debt
There are of course other forms of debt in which the actual act of debt consolidation would be beneficial, however the above examples depict some of the more mainstream uses.
How is a debt consolidation loan beneficial to me as a borrower?
There are some very obvious benefits to be gained from using debt consolidation loans, but there are also some less obvious benefits, which can be achieved as a result of using debt consolidation loans. Examples of each can be found below: -
- Debt consolidation loans help the borrower reduce their monthly outgoings, thus allowing "more freedom to breath" when it comes to managing personal finances.
- Credit card, catalogue and other common borrowing facilities often carry above average rates of interest. A cheap rate debt consolidation loan can effectively wipe out your commitment to these higher rates.
The Less Obvious
- Managed in a reliable and efficient fashion, debt consolidation loans have the ability to improve the borrowers credit rating.
- In an indirect way, debt consolidation loans also teach the borrower to be more disciplined in their approach to managing credit and/or budgeting their monthly finances.
Making Debt Consolidation Loans work
To make a debt consolidation loan work for you, and for the chances of your endeavours into using this type of loan bearing fruit, it is absolutely vital for your granted repayment rate to be low. Essentially, the rate that you pay on your debt consolidation loan must be less than the mean rate payable on the sum of your debts. However, because a debt consolidation loan is usually taken out over a relatively long term, sometimes a rate that is almost equal to your highest commitment (such as a credit card) can also work.
Remember, debt consolidation loans are devised to reduce your monthly commitments, through an extension of the amount of time in which you actually remain in debt for. They are only ever practical if your current monthly commitments are unfeasible and should never really be considered if you are able to manage your debts, as you would simply be prolonging your chance of clearing them completely.
Making sure you get accepted and/or qualify for a cheap rate
To increase your chances of getting a cheaper debt consolidation loan, there are a few factors to bear in mind before you apply. Below we have provided a list for your consideration: -
- Tenancy - If you own your own home, you are more likely to qualify for a cheaper rate on your debt consolidation loan than if you are renting or living with parents. Secured debt consolidation loans are also more likely to be accepted, as many borrowers will be looking to repay their loan over a longer term, meaning an unsecured loan is usually out of the question.
- Amount - On average, debt consolidation loan applicants within the UK are looking to borrow around £15,000 to repay their debts. Again, tenancy will play an important role in deciding whether you qualify for a higher amount.
- Credit Profile - As you will probably already know, your past credit conduct will play a BIG part in deciding the type of loan that you get, or if you qualify for a loan at all. If you're unsure of how your credit history looks, try requesting a copy of your file from a credit reference agency.
How can Cheap Loans help me to get the best deal?
As having a cheap loan
is crucial for your debt consolidation activities to be successful, we believe no other provider is better fixed to help. We search more than 500 loan plans, in order to return the cheapest debt consolidation loan deal to our customers. Remember our service is free, impartial and non obligatory if you change your mind after applying.
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