What is a Consolidation Loan?
Many thousands of people across the U.K. are struggling with serious personal debt problems and, to some, it must feel like they're carrying the weight of the world on their shoulders.
Fortunately there are some very effective debt solutions available to help solve these problems and remove the worries, with one such debt solution is a consolidation loan.
What Is A Debt Consolidation Loan?
A debt consolidation loan is the name given to a loan, from a bank, building society or loan company, where the money raised is used to pay off existing debts.
The original debts are consolidated into one payment, rather than the original multiple payments.
One main advantage of the consolidation loan is that it reduces the monthly cost of the debt, when compared to the original debt repayments.
It is, therefore, more affordable and, because there is just one monthly payment, it is easier to keep on top of.
Convenient solution
Acceptance for a consolidation loan will be determined via a credit check, where the lender assesses the risks posed by the borrower.
For many people, a consolidation loan will be the best available option. It is generally a stress free, convenient solution, can be quick to arrange and can save a considerable amount of interest payments.
Careful consideration
Before you consolidate, you should give careful consideration to your circumstances, to make sure you're taking the right option.
You need to assess whether you will be able to afford the new loan and whether the loan will be sufficient to clear your existing debt in full. If not, you need to ensure you'll be able to afford the existing debt and the consolidation loan together.
Falling into the trap of believing a consolidation loan is the way forward, without actually taking the time to calculate whether it is affordable could lead you into a spiraling debt crisis.
So, it pays to do your homework. You might also consider approaching a professional adviser for some guidance on 0800 088 7502.
Here are a list of the pros and cons of a consolidation loan:
Consolidation loan advantages
- A consolidation loan is likely to reduce your monthly payments.
- A consolidation loan can take the pressure off from existing creditors quickly.
- A consolidation loan makes managing your debt easier by combining your existing debts into a single payment.
Consolidation loan disadvantages
- A consolidation loan can mean you repay more but slower over a longer period.
- A consolidation loan may mean you are charged additional costs for setting up the loan.
- If secured against your home, a consolidation loan will mean your home maybe at risk if you are unable to make the repayments.
- Consolidating your debts with just one creditor gives that creditor control over your full debt.
Don't overcommit
If you are in any doubt, take advice before you're committed to consolidation.
Entering into a consolidation loan is a serious step if you're not confident you'll be able to afford the payments.
Get Professional Advice
Talk to one of our advisers in confidence. They'll help you establish whether a consolidation loan is the right path for you to take. Simply call us now on 0800 088 7502.
Or complete this form and we'll call you back at your preferred time.
