When you are drowning in debt and need to find a way out, you will want to look into getting a loan to consolidate it all. Consumer debt is at an all time high in the UK right now, especially thanks to bad credit payday loans and credit cards. If you want to get a handle on your current debt, it is highly recommended that you explore this option before making a decision. Consolidating your debt could be one of the best financial decisions you make in your life.
The Basics of Debt Consolidation
Debt consolidation involves taking all of your individual debts to creditors and combining them into one monthly payment that you’ll be responsible for paying. Your numerous unsecured debts will turn into one loan. This can make paying back the money you owe a lot less complicated overall. After you have consolidated your debt, you’ll only have one payment to worry about each month.
Benefits of Debt Consolidation Loans
There are many benefits to getting a debt consolidation loan that you should look into, including:
• Less stress: You will no longer have to deal with making multiple payments on your debts because you will only have a single payment. This will reduce your stress level by quite a bit. Everything will be much simpler once you have consolidated your individual debts.
• Lower interest rate: A lot of the people who consolidate their debt with one of these loans end up with a lower interest rate. When you have a lower rate on your loan, you will have an easier time paying back the money you owe. Depending on what your own personal situation is, you could get a much lower rate.
• No more creditors hassling you: One of the worst parts about owing creditors money is constantly being harassed by them with phone calls, emails, and text messages. The lender that you get your debt consolidation loan from will work with your creditors to put a stop to the harassment.
• Save money: A lower interest rate can save you money, but you’ll also save on late fees and various fines. You will no longer have to deal with the late fees that can quickly pile on, putting you even deeper into debt.
• Improve your credit score: Taking out a debt consolidation loan can theoretically improve your credit score, so you will need to keep that in mind as well. If you continue to make all of your payments on time, your credit will improve as a result.
What Type of Debt Qualifies for Debt Consolidation Loans?
There are actually many different types of debt that you will be able to consolidate, including credit card debt, student loans, payday loans, and personal loans. Most lenders are very flexible with the kind of debt that they will help their clients with consolidating, so this isn’t something you should have to worry about.
Drawbacks of Debt Consolidation Loans
There aren’t a whole lot of downsides to getting a debt consolidation loan, but there are still some things that you will need to keep in mind. These loans are not always fast, so the entire process could take a while before it is completed. You will need to be a little patient, but it can be well worth it in the end. A lot of lenders require that the person has a minimum amount of debt, so you might not be able to qualify depending on how much you owe.
Finding the right Lender
It is imperative that you spend some time searching for a good lender for a debt consolidation loan, because otherwise you are just setting yourself up for trouble. Not all private lenders are reputable, so it is therefore important to do this research before making a final decision. You should spend some time reading reviews for different lenders so you can find out what some of their patients have to say about them. Choosing the right lender can mean getting a lower interest rate on your debt as a whole, which in turn means that you can pay it off sooner.
Debt Management Plans
A majority of people who consolidate their debt choose debt consolidation plans because of how effective they are as a whole. Many of the businesses that offer these plans will work closely with your creditors to help come up with a solution that works well for everyone involved. There are a number of debt consolidation options, but this is one of the very best. You will negotiate the terms of the loan with the lender beforehand until you both reach a mutually beneficial deal.
You have numerous types of loans that you can take out to consolidate your debt, including personal loans. These loans usually come with the lowest interest rates, which is why so many people go for them. If you have numerous unsecured loans that you want to combine into one monthly payment, this is probably the option for you.
Home Equity Loans
Equity loans or second mortgages can also be an effective way to consolidate your unsecured debts, and it’s an option that can work for a lot of people who owe a significant amount to numerous creditors. Not everyone can take out this sort of loan, as it depends how much equity you already have in your home. You will also need to put your home up as collateral, which means that you risk losing it if you cannot pay the loan back on time.
What You Should Consider
There are a number of things that you should consider before making the leap and getting a debt consolidation loan, including how much money you owe and to how many different creditors. If you owe thousands of pounds to numerous creditors, you should at least think about consolidating your debt. This option isn’t so much worth it for those who only owe a few hundred pounds to a couple creditors though.