Debt Consolidation Loans

Debt Consolidation Loans

The cost of living can be expensive and debt can quickly build up. It can be a struggle trying to manage different payments to different people, and it can sometimes feel as if you’ll never pay off what you owe.

A debt consolidation loan can help by paying off your existing debt, reducing your outgoings, and leaving you with one simple, affordable payment, often at a lower interest rate.

Debt consolidation works – but it’s not right for everyone. Speak to one of our experts, who will make sure you get the best advice.

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Simply put, debt consolidation is where you take out a loan to pay off several debts. The loan is then shared out between the people you owe money to (your creditors), and they are paid off in full. The debt you owe them is now closed (a debt that has been closed down is often referred to as being “settled”). This means that it has essentially been repaid.

Now, rather than having to pay different creditors different amounts, at different times of the month, you just have the debt consolidation loan to pay back – one payment, to one lender, once a month.

This is one of the main benefits of debt consolidation – it makes things a lot easier to manage. It can often reduce your outgoings too, giving you some more disposable income and more importantly, a chance to build up some savings, get back on your feet and start living again.

Almost any debt can be paid off with a debt consolidation loan – we’ve helped customers pay off credit cards, store cards, personal loans, mail order accounts, and car finance, as well as tax bills, County Court Judgements (CCJs) and utilities arrears.

Glad you asked – as we said before, although it helps many people, debt consolidation isn’t right for everyone and it does carry some risks:

  • You’ll be replacing unsecured debt with a loan that is now secured on your property. As with any other secured loan or mortgage, you home may be at risk if you don’t maintain the payments.
  • By taking out a debt consolidation loan, you may increase the length of time the debt is to be repaid, and therefore end up paying back more overall.
    Sometimes, there are other options for dealing with debt – such as speaking directly to your creditors and asking them to reduce your payments and freeze interest and charges, or speaking to a debt management company. These options carry their own risks – such as potentially affecting your credit profile – but they may be more suitable for you than a debt consolidation loan.

Our expert advisers will carefully consider your situation and assess whether or not a debt consolidation loan is right for you.

It depends on the lender. Some lenders will write cheques for you to send to your creditors, others will pay your creditors directly via bank transfer, and some others will expect you to pay your creditors yourself once they have given you funds. Once the loan is arranged, our case managers will make you aware of exactly what you have to do and will help you through the process.

No, they can’t. With a debt consolidation loan, your existing debts aren’t secured against your property – they are paid off. The debt consolidation loan is a new arrangement with a new lender – and this is secured against your property, so you will be putting your home at risk if you don’t keep up with your payments.

Any unsecured debts that you don’t consolidate will remain unsecured, and entirely separate from your debt consolidation loan.

Yes, you can. In fact, debt consolidation loans are often used by people to either clear up bad credit, or get rid of problem debt before it starts to affect their credit profile.

As with any loan for bad credit, the rates won’t be as good as they would be for someone with a clean credit file, but there are still some very good deals available, and the benefits of getting rid of problem debt before it gets any worse can often outweigh the costs.

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Representative example: Borrowing of £40,000, plus £595 lender fee, plus £3,000 broker fee, totalling £43,595, over 192 months on a 5-year fixed product with an initial borrowing rate of 9.2%, following a variable rate of 9.6%. There would be 60 monthly instalments of £434.49, following 132 monthly instalments of £442.52. Total amount payable £84,577.09, made up of: Mortgage amount £40,000, Interest £40,887.09, Lender fee £595, Broker fee £3,000, Exit fee £95. Overall cost for comparison purposes 11.4% APRC.