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What is a Consolidation Loan?
Perhaps the most frustrating part about falling into a web of debt is dealing with numerous creditors all at once. You need to keep an eye on multiple accounts, sort out piles of bills that are wrecking havoc in your desk every month, and if you become late on your payments, a series of phone messages from creditors who want to be paid will keep coming at you like a tide banging on a rock. In this situation, debt consolidation loans will help make life a whole lot easier for you.
How Debt Consolidation Loans Work
So how do debt consolidation loans work in making things a lot smoother for you? Basically, you take out one huge loan that is enough to pay all your other loans and debts, and then make monthly payments on that single loan. This makes it easy for you because you no longer have to track multiple accounts, sort out piles of bills, entertain and an army of angry creditors, and multitask in general because you will only be focusing on one single loan.
What are Your Options?
If you want to avail of debt consolidation loans, you’re in for a great news because it has never been easier to take out the loan today. A lot of this has to do with the presence of online private lenders, who have become alternatives to traditional financing institutions likes banks and credit unions. The best way to find the right consolidation loan for you is with help from an adviser link Pickaloan.co.uk. You can simply apply for a loan online and have it deposited into your account without leaving your home. All in all, there are two types of consolidation loans that you can take out and they include:
1.) Secured Debt Consolidation Loan
If your consolidation loans are secure, it means there is an asset backing it up like your house or car which will serve as collateral for the loan. Most lenders tend to favor this type of debt consolidation loan for the simple reason that there is a real asset that will cover their losses once you decide to default on your loan. It also means genuine risk on your part because once you can no longer commit to your payments, the bank can legally take possession of that asset that you put as collateral.
2.) Unsecured Debt Consolidation Loan
A debt consolidation loan that is unsecured is harder to obtain since there is no collateral attached to it. Without the collateral to offset the risk of a default, lenders also tend to put higher interest rates and lower qualifying amounts for the loan. Nevertheless, the interest rates are still usually lesser than those with credit cards and are normally fixed which makes it easier for you to budget. Typically, the loan has to be paid off in three to five years and because there is no collateral involved, you don’t risk losing anything except blemishing your credit report if you miss out on your payment duties.
Advantages of Debt Consolidation Loans
There are also certain advantages that you can enjoy when taking out debt consolidation loans. Aside from the fact that they are highly accessible and available online, some of the benefits with consolidation loans include:
- Lower monthly payments since you will be covering your debt consolidation loan over longer durations.
- Your finances become simplified because you will only have to focus on paying a single loan every month. This also makes it easier for you to manage your budget.
- Has the potential to provide you will lower interest rates if your consolidation loan has a lower rate than the total amounts of interest rates that you will have to cover with your current debts.
- Relieves you from all the stress, anxiety and hassle involved in dealing with multiple debts. No more piles of bills and constant calls from collection agencies.
Finding a Debt Consolidation Loan UK
If you possess a solid credit history, finding a debt consolidation loan the UK is relatively easy. From banks, credit unions, credit card companies, to private lenders, the options are almost endless. However, if you don’t have a great credit score or history, taking out the loan from banks and other mainstream lenders might prove challenging or nearly impossible at most times. If you are snubbed by banks and credit unions, there are still lenders like (website name) that you can turn to. The lender is less rigid when it comes to scoring and ratios making it easier for you to qualify.
If you explore other options aside from (website name), just be wary of extravagant fees and hidden charges that other lenders will attach in your debt consolidation loan UK. To avoid falling for these charges, be sure to:
- Review the terms and conditions of the loan and make sure that there are no extra fees or charges before you make that binding signature.
- Determine if there are any fees when you pay off existing loans early as this could potentially eliminate any chance of savings that you can make.
- Refrain from paying a fee for a company to arrange you a debt consolidation loan UK unless that company is giving you some advice which will surely be worth the investment
The Process of Consolidating Debts with Debt Consolidation Loans
Once you have set your debt consolidation platform in motion, which debt should you deal with first? When it comes to this matter, your lender may be the one to decide which creditor should be repaid first and then next and so and so forth.
If you are lender is giving you the freedom to do this, then you should begin paying off the debt with the highest interest rate as this will save you more money. However, if you have a lower-interest loan that has been causing so much drama and stress in your life than the higher interest rate ones, (like a guarantor loan that has bruised family relations), you may want to prioritize that loan first.