Many British today are carrying unmanageable amounts of debt, ranging from credit card bills to home mortgages. One possible solution for families is to use a debt consolidation loan, as it can make their monthly payments more affordable as people across the UK need help. Studies from Comparethemarket.com and Financial Conduct Authority show that most British owe creditors almost £10,000 per person (not including mortgages), spread out among several creditors.
It is not only the amount of debt that is the problem, but it is the number of creditors. With so many different loan payments due on different schedules to banks such as Barclays, HSBC, American Express, RBS and others, it can be difficult to find a workable way to pay them off. Debt consolidation loans can be an effective means of establishing control once more.
Consolidation Loan Companies and Banks
Consolidating several loans into one used to be a prohibitively difficult practice. It used to involve applying to many different banks or private lenders and could take weeks or even months. However, there are now many companies in the United Kingdom that do all of the work themselves, and most of them work online. They may offer secured or unsecured debt consolidation loans, and it will often depend on the applicant’s credit scores, income, and other factors.
Getting a debt consolidation loan is now a relatively straightforward process, and it can help pay a wide variety of bills. It involves filling out a few forms of only a few pages each, or the aoolications can be done online. These consolidation loan companies then contact their network of banks and draw up a list of offers. Some of the providers in the UK include Ikano, RBS, RateSetter, Santander, Progressive and Lendatble among others.
Debt consolidation loans help you manage overwhelming financial challenges. They do this in two ways. One is by lowering the average/aggregate interest rate paid, which can be very helpful for the borrower. The second is by combining all of the separate debts (whether credit cards, medical, car payments, etc.) into one single debt, with a single payment to make.
One benefit is that it allows debtors to manage their budgets with greater ease. It also has the advantages of a lower overall interest rate and a longer, easier repayment term. A third benefit is the applicant only needs to make one payment per month (for the new loan) and not have to keep track of or repay all the other creditors. Debt consolidation loans can keep debtors from defaulting on their current payments.
The savings on interest rates can make a significant difference. People carrying debt from multiple loans and credit cards can easily end up paying as much as 15 to 20 percent in interest in the UK. Now some of the UK lenders may issue a new, unsecured loan at 5-12% (depending on many factors). If the interest rate is lower, than a debt consolidation loan can save the borrower hundreds of pounds a year in interest costs, and this is a direct form of financial help. It provides crucial breathing room and the chance to avoid accumulating bad credit reports and loan defaults. It also frees up the borrowers income to pay other bills.
The Signs of a Good Debt Consolidation Loan Company
Each debt consolidation company has its own terms and conditions, of course, with different finance charges, total payments, interest rates, APR (annual percentage rate) and credit limits. Comparison shopping among all the UK lenders and banks is the key to finding the best terms.
It is very important to only take out consolidation loans from reputable companies. It is important to check the terms that each company offers in order to avoid unfair and even fraudulent loans. A good debt consolidation company should have most or all of the following features:
1) No application fees.
2) No hidden charges.
3) Loan fees and APR rates that are close to the average.
4) Responsive customer service with a good reputation.
5) Short, easy application forms.
6) A well-organized website that is easy to navigate.
7) Acceptance of customers with bad credit.
8) No hidden fees for paying off existing debt.
Debt consolidation companies with too few of these features should not be trusted no matter what their terms are. In addition, you need to ensure the new APR rate is lower than any existing debts you have, otherwise there is no point to use a debt consolidation loan as a form of assistance.
The Drawbacks of a Consolidation Loan
Consolidating debt with loans needs to be handled with care, because even loans from good companies can have terms that are difficult to deal with. Or the contract may not be that clear, even though the FCA (Financial Conduct Authority) has made progress on this.
Many of these companies can offer lower monthly payments because they extend the term of the loan. This provides some immediate relief from the financial burden, but it increases the total price paid in the long run. Therefore make sure you can pay it off if you proceed.
Can a Debt or Bill Consolidation Loan Help?
It is important to take the time to find the loan package that best balances short and long term needs. Ensure the APR rate is lower than what you are currently paying. If the process of finding and applying for an unsecured consolidation loan is handled with care and due diligence (and get advice if you need it!) debt consolidation loans can be the ideal solution to overwhelming amounts of debt.