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Consolidation Loans UK
Most, if not all, banks have become flexible with their requirements as long the borrower can provide collateral. They will also require that the borrower has a credit rating the meets the minimum requirement of the bank. By doing so, the borrower gives the lender an assurance that he is not a high risk. In addition, the applicant should have enough income and minimal debt repayments. With these prerequisites, they can apply for debt consolidation loans UK.
It is important to adhere to the lender’s terms and conditions, otherwise, his application will not likely get approval. Credit scores are very important as having a high credit remark means very high debt payments. Meanwhile, having no collateral to pledge also reduces the chance of having the loan. While there are other options to choose from, these financial solutions may often come more complicated. Therefore, before applying for debt consolidation loans, the borrower must assess himself first and find out if his prerequisites are sufficient to satisfy the lender’s demand.
What Happens To Bad Credit Borrowers?
More or less, they can still have the loan amount they need; however, it comes with various consequences. First, the interest rates are expensive as the best rates are offered only to those who have impeccable credit remarks. Despite the good relationship that the borrower has with his financial institution, such as banks, failing to possess a pleasant credit history will still lead to high interest rates. The other risk that comes with bad credit loans is the lower loan amount. Lenders find it hard to provide trust to borrowers who have a poor credit history. For some reasons, it is somehow dangerous to give a big amount of money for fear of not getting it back. After all, having a poor credit score indicates that the lender commits default, late payments, or arrears.
Whether the applicant has a good credit rating or none, pledging good collateral improves the approval rate significantly. Good collateral is assets that are new models, such as new boats, houses, or vehicles. The property should be valuable so that it can be liquidated or sold in case the borrower fails to repay the loan.
Collateral-based loans are usually offered with lower interest rates, however, financial institutions have different rates. Banks, for instance, charge around 7-12% while lenders offer 14% for their secured loans and 30 % for the unsecured type.
Are Debt Consolidation Loans Important?
Basically, it depends on the severity of the debt. No matter how beneficial the loan is, if it doesn’t suit the borrower, then it becomes more of a disadvantage. The loan emphasizes low monthly payments, however, the total sum may show an extremely large amount. As a borrower, it is important to study the loan thoroughly. Evaluate whether it’s taking a lot of time to complete or if the interest is higher than all the rates that the borrower is currently compensating.
Meanwhile, if the borrower is aiming to settle his existing debts and he thinks that the loan’s benefit can overcome its drawbacks, then he can consider the loan.
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