Debt Consolidation Loans
Many people have more than one type of debt; this might be from multiple credit cards, overdrafts, store cards or other types of loans. Each debt will need to be kept on top of to make sure payments are on time which can sometimes be difficult to manage, leading to mistakes such as missed payments. Debt consolidation loans allow you to combine each of your individual debts into a single loan, so you only have one payment to make each month.
How a debt consolidation loan works
If you are struggling to keep up with separate credit payments, the debt from these can be moved into one consolidated loan. You can either move all of your debt – or a significant amount – into one loan, using the consolidation loan to clear your debt with the other lenders and close those accounts.
A debt consolidation loan can significantly help to manage your money as you will only have one payment each month to make to one provider. You will also only have one interest rate to consider, and you’ll often be paying less each month, than you were paying before over your individual debts.
Your monthly payment will be dependent on your situation and the total amount of interest you pay may increase with the length of the loan term.
Debt consolidation loan options
Consolidated loans can either be secured, where an asset – such as your home – is used as security if there are any missed payments, or unsecured, where the lender has no claim to your financial assets if you miss any payments, but can instead take you to court.
Secured loans typically allow you to borrow more money and often at a lower rate. You also have a better chance of being approved for a secured loan if you have a low credit rating, but you do have the risk of losing your home if you miss payments. Unsecured loans don’t have these risks, but you might not be able to borrow as much, and will be likely to have higher interest rates.
Your property may be repossessed if you do not keep up repayments on a mortgage, loan or any other debt secured on it.
Other loan considerations
Although consolidating your debt might seem like a good idea, it might not be the best option for you. Before considering whether to take out a debt consolidation loan, you should make a list of all your current debt and see if it’s more cost-effective for you to consolidate it or if the combined interest rate would make this more expensive for you. You should also see if there are any redemption fees if you choose to repay your loan earlier than you originally agreed.
Loans with Better Chance Finance
Better Chance Finance can help get the right secured loan for you by introudcuing you to a provider to get you the best deal. We are authorised and regulated by the Financial Conduct Authority (FCA) and follow their Treating Customers Fairly (TCF) guidelines, so you can be confident that we will only offer you products that are right for you.