Do you feel that you’re paying more than you should on your loan repayments?
Maybe you’re struggling with multiple, high-interest loans that seem to eat up your salary. In these circumstances, debt consolidation can be a great alternative – many people find it much easier to service one loan, rather than several, and there’s always the chance of obtaining a consolidation loan that’s got a lower interest rate than your current borrowing.
Unfortunately, obtaining a consolidation loan may not be that simple. Our smart debt consolidation advice gives you the information you need to make the best decisions about your borrowing.
How can a Debt Consolidation Loan Help?
Debt consolidation loans have a number of advantages. Some of these include:
- Simpler administration. You’re paying one repayment a month, so it’s easier to ensure you have the required amount available.
- The chance of borrowing at a cheaper rate may lessen the amount you pay back overall.
- The opportunity to access a product that may be unsecured or secured, backed by a co-signatory, and/or designed with flexible repayment options that could better suit some buyers.
- For borrowers who have missed repayments on their existing loans, debt consolidation ensures those loans are paid off in full. If you’ve got a poor credit record, paying off your existing loans by opting for an affordable consolidated loan product can help to improve your credit score. In turn, this will make it easier to access low-interest borrowing in the future.
Can I get a Competitive Debt Consolidation Loan?
Like most other types of borrowing, the rate of interest you’re charged will depend on the level of risk lenders feel that you represent. If you’re a borrower that’s had to take out high-interest loans, which has led to your current need for debt consolidation, it could be that your credit rating isn’t good enough for low-interest lenders to consider you.
If you’re noticing that you can’t seem to access low-interest borrowing, it’s worth getting a copy of your credit report from a consumer credit agency. For borrowers seeking a consolidation loan with a sub-prime credit score, there are both short-term and long-term ways of improving it.
In the short term, making sure that you’re keeping up with existing repayments helps. If you’ve got multiple loans, particularly if you’ve defaulted on one or more, paying them off with a consolidation loan will help, as the defaults and outstanding balance will be settled.
Over the long term, it’s important to keep up repayments on existing loans, but also to demonstrate that you can take on fresh credit and repay it promptly. A consolidation loan repaid promptly over time, can make a marked positive difference to your credit rating.
What are the Options for Debt Consolidation With a Poor Credit Rating?
There are several potential options for obtaining a debt consolidation loan even if you have a poor credit rating.
You may wish to:
- Ask a co-signatory to sign for the loan. A co-signatory is usually someone with a good credit rating who, by signing the loan agreement, agrees to take over the loan repayments if you’re unable to meet them.
- Take out a secured loan. A secured loan uses your home as security for the loan. If you default on the loan, you could lose your home.
- Opt for a high-interest consolidation loan (which, if you can keep up the payments in the short-term, will usually improve your credit rating), then apply for a lower interest loan once six months or so have passed.
Get in touch if you need more debt consolidation advice.
If you are Struggling Financially, get Help
If you are struggling to meet your loan repayments each month, it’s best to get the assistance you need promptly. Agencies such as the National Debtline or Debt.org can provide smart debt consolidation advice to help you make the best decisions for your circumstances.