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Consolidation loans: The different available options in the UK

When you are encumbered with multiple debts, dealing with numerous creditors all at once can certainly be a big headache. You need to manage multiple accounts and work through piles of bills every single month. What’s even more vexing is when you become late with more than one of your payments, you will be bombarded by a series of phone calls from creditors demanding for their payment. What’s the quick solution to such madness? Consolidating all your loans into one easy to manage loan!

How Consolidation Loans Work

Consolidation loans are designed to make life a lot easier for you. Simply put, you will be taking out one big loan that is enough to pay off all your existing loans and debts and make single monthly payments for only one loan. Through this method, you are virtually relieving yourself from the burden of tracking multiple accounts, organizing tons of bills, dealing with an army of angry creditors, and multitask in general since you will be focusing on one single loan.

What are the benefits?

Bud consolidation loans are not only made to make things life easier for you by taking away all the stress involved in managing multiple debts. The financial products also provide several benefits to any borrower in the UK such as:

  1. Manageable monthly payments – By taking out a consolidation loan with a payment term that is spread for a considerable time, you can reduce your monthly repayments into a manageable level. Most people are often allowed to pay the minimum payment on their existing debts. This means that you will only be covering the interest component of the loan while leaving the actual amount owed unchanged.
  2. Improve your credit rating – If you manage to pay off the loan on time and on the agreed terms and conditions without incurring further debt, this will positively reflect into your credit rating. It would also be best that you check your credit report first before applying for the financial product.
  3. Minimizing interest payment – If your existing debts are expensive financial products from stores and credit cards that have hefty interest rates, you will be able to pay back less in interest on your debt with a consolidation loan.

How do I get a debt consolidation loan?

To determine if you are eligible for the loan, the lender will evaluate how much debt you owe and your corresponding credit risk. If you have a past history of bad credit or large unmanaged debts, a lender may still consider your need for funding but with some form of security which will be discussed below. With this kind of dealing, you will need to put up some of your assets like your property as collateral against the money that you want to borrow, minimizing the risk involved in the part of the lender. However, you need to guarantee that you will be able to keep up with your loan’s repayments as your house could be at risk in the event that you default.

Today, there are numerous loan options that can be used to consolidate existing debts. But just like any other type of loan, the lender will need to look at important aspects about your application such as:

  • The amount of loan that you intend to borrow
  • Your credit history (if it meet’s the lender’s criteria)
  • How long you will need to pay off your loan

If all your outstanding debts are low and your credit rating is acceptable, you can take out numerous consolidation loans including personal loans and reduce your debt.

Can you get a consolidation loan if you have bad credit?

If you have bad credit, you may already know that taking out a loan, especially from a traditional lender like a bank or credit union, can be pretty challenging. However, this doesn’t mean that there are no longer options available for you. In fact, you can still get a loan to consolidate your debts despite your unappealing credit rating.

Majority of lenders will look at your credit record every time you apply for a loan but there are those who are willing to cater your need for funding even if you have had trouble dealing with your finances in the past.

However, if the lenders sees that you are a risky borrower due to your poor credit history, you may find that:

  • You will have to pay higher interest rates
  • You will have to borrow less
  • You may need to find someone to co-sign your loan deal

How to get the right bad credit loan option

The right consolidation loan is the one that is perfectly suited to your needs and present circumstances. Simply put, it is a loan deal that will allow you to pay off all your existing debts for the cheapest cost possible and enjoy affordable monthly payments that is tailored to your budget. To get the best consolidation loan for bad credit you should:

  1. Determine how much you owe – Try to see if there are any fees and charges that you need to payback when you pay off any of your existing debts earlier than what was agreed and then add all the debts that you want to consolidate. With debt consolidation loans for bad credit, you can pay off almost any type of debt or credit including loans, overdrafts and credit card debt.
  2. Determine what you can afford to pay every month – Make a concise budget to determine how much you can afford to repay every month. This can be particularly important if you have bad credit as you need to avoid incurring any late payments that would further blemish your credit record.
  3. Look for the cheapest rate you can get – While it’s difficult to get the cheapest loan rates if you have bad credit, it doesn’t hurt shopping around and comparing rates from different lenders. Look for the lowest rate that you are eligible with and try to borrow over the shortest time that keeps your new loan payments affordable.

You can rely on a comparison site to search for loan products from FCA regulated lenders that will allow you to consolidate debts. If you are looking at credit card consolidation, then a balance transfer may be another option that you might want to consider.

Consolidation Loans with a Guarantor

One of the options that you can consider if you have a poor credit standing and want to consolidate your existing debts is through guarantor loans. By using the unique financial products to consolidate debt and making the regular payments on the agreed terms and conditions, you may be able to build up your credit score by demonstrating to lenders that you have the financial capacity and discipline to stick to your payment duties.

Guarantor loans can be used for any legal purpose which includes consolidating debts. By taking out the financial products, you can pay off any existing debts you have and reduce your number of repayments down to just one in every month. You can borrow as much as  £15,000 and choose a short term loan of 12 months or extend this up to 5 years.

Eligibility for the loan

Virtually anyone can be eligible for consolidation loans with a guarantor as long as they are a legal resident of the UK and have an income level that is enough the make the repayments. If you meet the basic eligibility requirements, the next thing you need to do is find someone, preferable a person you trust like a family member or close friend, who has a good credit rating to act as your guarantor and co-sign the loan agreement with you. Basically, they will be vouching for your ability to make the repayments and if you are unable to, they will be the one to personally take over the repayments. This lessens the risk involved in your bad credit application allowing you to access larger amounts of consolidation loans with affordable rates and flexible payment terms.

Who Can Be My Guarantor?

Anyone can be your guarantor in a consolidation loan, with the exception of someone who is financially linked to you like your wife or husband. The person must also have a strong credit rating and a reliable source of income that is more than enough to meet the loan’s repayments. Your guarantor must also be a homeowner although there are lenders who accept those that are not as long as they have a favourable credit standing and income level.

Consolidation Loans with no Guarantor

If you want to obtain consolidation loans, having a guarantor is just one of the many options that you can consider. As a matter of fact, there is an abundance of options available in the UK today that will allow you to take out a loan to pay off all your existing debts with ease. And if you look online, you can find a whole constellation of reputable lenders who provide alternative financing to traditional lending institutions likes banks and credit unions.

Once you apply to a lender, there are normally two types of no guarantor options that you can consider:

Secured Consolidation Loans with no guarantor

If your consolidation loan is secured, it means that there is an asset attached to it like your house or car which will serve as collateral in your credit deal. Majority of lenders prefer this kind of loan deal for the simple reason that there is great security in their part in the event that you miss out or default from your loan’s repayments. This is because the lender has the right to repossess the asset and sell it to recoup the money that you still owe them if you default from your loan. This is something that you need to consider heavily if you are considering this kind of option.

Unsecured Consolidation Loans with no guarantor

Unsecured options are harder to obtain since there is no collateral involved in the transaction. And without the presence of collateral that practically offsets the risk of a default, lenders also tend to put higher interest rates and lower qualifying amounts especially if you are a first time borrower.

Nevertheless, the cost in taking out the loans is still lower compared to credit cards and normally have fixed payment terms that are tailored to your needs and present circumstances. Normally, the loan needs to be paid off in three to five years. The amount that you can take out along with its interest rates will depend heavily on your credit rating and income level. If you are fully qualified you can take out an unsecured debt consolidation loan for as much as £25,000 with APRs less than 5%.

Choosing a Debt Consolidation Loan Type

Bear in mind that when taking out a consolidation loan, whether secured or unsecured, you’re not at all getting rid of your debt. You are simply transforming it into one big debt so it is easier to repay and manage. You may feel like you already have lesser debt and may be tempted to borrow more in the coming days and this is something that you need to avoid at all costs. Always be disciplined when it comes to managing any form of debt and refrain from borrowing as much as possible until after your debt consolidation loan has been completely repaid. Even then, it’s crucial that you rely on sound judgement if you wish to take on another debt.

4.) Consolidation loans in the UK and Consolidation Loans with Instant Approval

There are times when borrowing money is simply the only reasonable option available to overcome some form of financial crisis that creep up due to some unavoidable reasons. Because of this, we sometimes rely on loans but due to debt mismanagement and excessive spending, we walk the path towards imminent bankruptcy or multiple debts. So you can overcome this kinds of situations,  instant debt consolidation is now available to you in the UK which will help you cover all debts in an instant by providing a single monthly payment.

Figure and interest
Instant debt consolidation loans allows you to take out large amounts of credit that is enough to manage numerous debts from £3,000 to  £50,000. The amount you can take out will vary depending on the type. If it’s a secured instant loan, then the amount can go as much as  £50,000 but normally in the estimated value of your collateral. The loans are also popular in the UK because of their affordable interest rate; unsecured loans have a bit higher interest rates compared to secured types because of the absence of collateral that serve as security.

Eligibility and availability

The financial products can be accessed from different loan lending companies and financial institutions. You can obtain them from traditional sources like banks and online lenders as well. It also provides you with the opportunity to improve your credit score if you have an adverse one. The main eligibility criteria  for anyone considering on taking out the financial product is to be a U.K. citizen and over 18 years old at the onset of the loan.

5.) Consolidation Loans from a direct lender online

If you have solid qualifications, finding a lender to cater your need for a consolidation loan is easy. From banks, credit unions, credit card companies, to private lenders, the options are almost unlimited. However, if your qualifications are somewhat lacking, taking out the financial products from banks and other traditional lenders might prove challenging and sometimes even impossible. If you have been rejected by banks and credit unions, there are still plenty of reputable direct lenders online that you can rely on. Online direct lenders are more lenient when it comes to their lending criteria making it easier for you to qualify.

If you want to take out the best deal from the right lender, there are certain things that you need to consider especially if you have bad credit. Extravagant fees and charges are among them and for you to avoid such disadvantages, be sure to:

  • Go over the terms and conditions of your loan deal and ensure that there are no extra fees or charges attached to it before you sign the contract.
  • Find out if there are fees and charges for early repayments as this could potentially remove any chance of savings that you can enjoy.
  • Avoid paying fees to companies that will help you arrange a debt consolidation loan in the UK unless that company provides solid advice that will aid you in the legal intricacies of taking out a consolidation loan in the UK.

Paying off existing debts with consolidation loans

Once you have successfully taken out a debt consolidation loan from a direct lender in the UK, which debt should you pay off first? In terms of this important matter, your lender may be the one to decide which debt should be repaid first and then next and so and so forth.

If your direct lender gives you complete freedom to choose which one to payoff first, then it would be best to cover those debts that have high interest rates as this will allow you to save more money. However, if there is a low-interest rate loan that has been giving you a lot of headache (there is a creditor who keeps inquiring you about it) then you may want to prioritize that loan first.