into one manageable payment
If you are in a difficult financial situation with multiple debts to be paid off, then consolidating all your existing debts by taking out a debt consolidation loan with one monthly payment could help.
This easy to follow guide will tell you all you need to know about debt consolidation loans and help you decide if they are the right choice for you.
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How Will Debt Consolidation Help My Finances?
A debt consolidation loan will make paying back what you already owe much simpler and potentially cheaper, offering a potential solution to your debt problems. You will not be able to reduce what you owe, but by consolidating your debt you only have to pay one manageable monthly payment, which could have an interest rate lower than those which you are currently paying.
By taking out a debt consolidation loan, you will also have the chance to improve your credit rating if you pay it off without acquiring any more debt.
Applying For a Debt Consolidation Loan
When applying for a debt consolidation loan, lenders will consider your outstanding debt, how long you need to pay it back, and your credit rating and history. If you have a bad credit rating they may only offer a secured loan, whereby your property is used as security. As such, if you are thinking of applying for a loan to consolidate your debt, this is something to bear in mind.
Pros and cons of different Debt Consolidation
Debt Consolidation Have one monthly payment
- Reduce payments without affecting your credit rating
- Consolidate debts into one lower monthly payment
- If you have a poor credit rating you may not be able to obtain a loan or you may be offered a loan with high interest rates/li>
- You may have to pay an arrangement fee
- Consolidation loans are often repaid over a longer period
Money Expert’s Debt Consolidation Process
Visit Money Expert for debt consolidation advice
Our aim is to make the whole process of becoming debt free as simple and as painless as possible for you, and the first step is offering you a free debt consolidation comparison service. Applying for a debt consolidation loan is both quick and easy with Money Expert, simply fill in the form on our debt consolidation page and we'll advice you regarding which lenders to go through to get the best deal possible.
Money Expert will help you to find the best consolidation loan for your needs
Once you've filled in our form and we have all the necessary information, we'll help you find a debt consolidation loan that is most appropriate for your situation. We know everyone is different, and everyone's financial situation is different, and so we'll make sure to find a loan that is tailored to your needs specifically.
Consolidate your existing debts into one simple monthly payment
Once you've found a suitable loan, all that remains to be done is to sign up, consolidate all of your existing debts, and they pay them off with one simple, manageable monthly payment. No longer will you have to worry about paying off several debts at once, each with a different lender and a different interest rate, with a debt consolidation loan, all of your debt is in one place.
What could a debt consolidation loan do for me?
There are many benefits to consolidating your debts and as such, these loans are one of the more popular debt solutions available.
The main benefits of a debt consolidation loan are:
- The simplicity of only paying back one lender with one interest rate through one monthly payment. This interest rate could be lower than those on your existing debts, particularly if those existing debts include those with credit cards.
- The potential for reduced monthly payments if you choose to spread your repayment over a longer period of time.
- The potential for improving your credit rating if you manage to pay back your consolidated debt without accruing any further debt.
As you can see there are various benefits to a debt consolidation loan, though it is worth mentioning that it is not necessarily the right solution for everybody, nor is it the be all and end all of debt solutions. If your problem is one of overspending, then this is something to address separately, but by consolidating all of your existing debt, you will at least make paying back what is already owed simpler, and possibly cheaper.
Would a debt consolidation loan reduce my monthly payment?
It is certainly possible for monthly payments to be reduced by taking out a debt consolidation loan. As mentioned above, this is because:
- You can spread your payments over a longer period of time, thereby reducing the size of each individual payment. And,
- The interest rate on a debt consolidation loan can be lower than those of your current debts, of course depending on the nature of those debts. Those applying for credit card debt consolidation for example are likely to get lower interest rates than what they are paying initially.
The reductions on monthly payments can be significant, indeed some customers have managed to reduce their monthly payments by over 50%. But again, it is worth noting that all cases are different and so the nature and benefits of the loan will differ from case to case. If you have a bad credit rating for example, you will not get as good a deal as someone with a better rating. Though the opportunity to improve your credit rating is still there with the debt consolidation loan.
Frequently Asked Questions
What is a debt consolidation loan?
A debt consolidation loan is one whereby all of your current debts are paid off by a loan from your new lender, and are consolidated into one debt, with one manageable monthly payment. These monthly payments can be spread out over a longer period of time and may have a lower interest rate than those you are currently paying.
Will my debt consolidation loan need to be secured?
If you have a bad credit rating/history, then lenders will generally only offer you a secure loan, this means that your property will be put up as security against the loan and will be repossessed should you be unable to pay it back.
What duration will my loan last for?
This is up to you, you can choose how long you wish to have the loan for. Bear in mind that the longer the duration of the loan, the lower each individual monthly payment will be, but due to interest, you will end up paying back slightly more overall. As such it is worth carefully considering your means so that you can get the best balance between the two, allowing you to become debt free as soon as possible.
How many creditors can my loan cover?
There is no formal limit to the number of creditors that a debt consolidation loan can cover, though if you owe debts to a large number of creditors, then your credit rating will likely be poor, and as such you will be offered an increased interest rate, or only a secured loan.
Can I still consolidate debts with a bad credit rating?
Yes, creditors will generally still offer loans to consolidate the debts of those with bad credit ratings, but will offer loans with either increased interest rates, or, more likely, only offer secured loans whereby your property must be put up as collateral.
What if my financial circumstances change?
If your financial circumstances change during the course of your loan, then it is worth contacting your creditor to see if you can reduce or increase your loan's duration to fit with the changes to your situation.
Why choose Money Expert to consolidate my debts?
With our quick, free debt consolidation service, there is no reason not to choose Money Expert to restructure your debts. We'll make the process as easy as possible, putting all the relevant information in one place, and helping you with no obligations . We aim to help you find the debt consolidation program which suits you best.
Can I use a credit card to consolidate my debt?
No, indeed rather the opposite; debt consolidation loans are often taken out as a result of inflated credit card debt and while you will still be able to use your credit card after having consolidated all your debt, it is not advisable, since doing so will simply increase what you need to pay back and worsen your credit rating.
Who regulates debt solutions in the UK? The OFT
All financial services in the UK, , were regulated by the Financial Conduct Authority (FCA). The FCA however has recently been split into two separate regulatory bodies: the Financial Conduct Authority (FCA), and the Prudential Regulation Authority
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- Clear your debts without the need for a loan
- Have one affordable monthly payment
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