A debt consolidation loan can save you money!
Are you struggling to keep up with paying off several credit cards and loans? Do you have to make sure you have lined the pockets of several lenders every single month to avoid getting a bad credit history? Have you ever thought that there must be a more cost effective method of debt management? Well of course there is! Rather than paying several different lenders you can now take out a debt consolidation loan. This can be used to pay off all your existing creditors and lump the amount you owe into one simple loan, with one interest rate and one monthly payment.
Debt consolidation loans are an extremely popular way of reigning in your number of creditors and the number of monthly payments you have to make. The Office of Fair Trading estimates that in 2002 £32 billion in unsecured lending and £8.4 billion in secured lending was used for debt consolidation purposes.
Low down on debt consolidation loans to keep you in the know
There are two main types of debt consolidation loans available. The type you choose depends on whether you have a property that you want to use as security or not.
Unsecured debt consolidation loans
| | 1. These loans act like a personal loan as they are not secured on any home that you own. The only major difference is that the loans are granted for the sole purpose of consolidating your existing debt, not adding to it!
2. The loan can either have a fixed or variable interest rate; this totally depends on the debt consolidation loan company you have chosen. The interest rate is likely to be higher than any secured debt consolidation loan as the lender is taking more of a risk in lending unsecured money.
3. Unsecured consolidation loans are normally only used for debts of thousands of pounds, not tens of thousands. If you have a large amount of debt to consolidate, you may want to consider a secured debt consolidation loan or seek professional advice. |
Secured debt consolidation loans
| | 1. These loans act like a home owner loan as the amount loaned is secured against your property. That means that your house is at risk of repossession if you do not keep up the monthly repayments.
The loan can either be obtained from your current mortgage lender or from other consolidation companies. If you use a different lender to your mortgage provider, the consolidation loan will become a second charge on your home.
2. These loans tend to have variable interest rates, so your monthly repayments can increase if the interest rate goes up. As the loan is a secured loan, you will probably benefit from lower interest rates than an unsecured debt consolidation loan.
3. A secured debt consolidation loan can have a repayment term of anywhere between 3 and 25 years. |
What other terms can a debt consolidation loan be known as?
| | 1. Consolidation loan.
2. Unsecured consolidation loans.
3. Secured consolidation loans. |
Where can you obtain a debt consolidation loan from?
For an unsecured loan for consolidating debt, there are a plethora of different options available from high street banks, building societies and specialist lenders. Just do your homework and compare several companies to find the best interest rate, term and monthly repayment plan for you.
Click on the link below to see five reviews of companies that provide unsecured debt consolidation loans.
Finally in regards to a secured debt consolidation loan, your mortgage company should always be your first port of call. However, due to the demand for such loans from consumers, a number of specialists have cropped up in the marketplace, but always check their terms and conditions and find the most favourable offer for you. After all the aim is to get debt free, not lumbered with more!
