Are you fed up of remembering the EMI due dates of multiple loans? Do you want a single loan solution for all your credit card repayments? Are you unable to manage multiple loans from different lenders? Well, there is a single answer for all such worries, and that is a debt consolidation loan. It helps you to consolidate all debts into a single loan that you can repay at an affordable interest rate and without any hassle.
What is a Debt Consolidation Loan?
A debt consolidation loan is a type of loan that allows you to consolidate all your financial liabilities like credit card bills, personal loans, and medical bills into one. After taking a single debt loan, you have to take care of just one EMI per month.
Basically, there are two types of debt consolidation loans. First one is a secured one and second type is an unsecured one.
1. Secured Debt Consolidation Loans
Simply you have to collateral your asset like your car or house to avail such loans. Well, it sounds risky because if you default the loan repayment terms then you can lose your home. The interest rates of the debt consolidation loans are slightly lower, but you should take such loans only when you are sure you can repay on time.
You don’t need to secure against your assets like a home or a car. Such loans are quite safe, but the interest rate is slightly higher. If there is no security kept then it doesn’t mean you can miss EMIs. You have to pay off within the agreed tenure.
It is a smart idea to merge all loans, but you should know about its advantages and disadvantages.
Advantages of a Debt Consolidation Loan
When you club all your debts into a single one, it benefits you in various ways. You can save hundreds of pounds in the long run plus you can control a single loan in a better way. Here’re some of the benefits of availing debt consolidation loans:
1. Fewer Chances of Missing EMIs
It is quite easy to remember one single date of an EMI rather than multiple dates of various EMIs. You don’t have to panic after every second day as you have already clubbed all EMIs into a single EMI.
2. Long Tenures are Available
Usually, lenders offer long tenures on the debt consolidation loans. You can choose a repayment schedule as per your convenience.
3. Save Money
You might have taken multiple loans at different interest rates and some may be too much costly. By availing an affordable single debt loan, you can save a good amount of money in the long run.
4. Better Control
A single loan means a single lender. Now you don’t have to contact various customer care teams of your multiple lenders. You can easily control the administration part.
5. Improved Monthly Budgeting
You can manage your monthly budget in a better way as there is only single EMI per month to pay. There will be fewer chances of a late repayment fee that means more saving.
6. More Chances of Credit Score Improvement
Multiple EMIs means more chances of defaults and hence poor credit rating. But it is not the case with a debt consolidation loan. You have a single EMI to pay every month hence there are better chances of improving your credit score.
Disadvantages of a Debt Consolidation Loan
A debt consolidation loan is easy to manage and hassle-free. However, it has some disadvantages too, which you should keep in your mind before availing the deal.
1. Increased Total Cost of Borrowing
A debt consolidation loan is costly if you go for a high tenure i.e. 4 years. The total interest amount will be higher even if you have taken a cheap single debt loan. So always compare total monthly interest rates of your multiple loans with a single interest amount of a single debt loan.
2. Risk of Losing your Asset
If you have taken a secured debt consolidation loan and if somehow you miss EMIs for long then there are higher chances of losing your asset. Always think twice before taking a secured loan. Repayment default means your asset is gone!
From Where to Get a Debt Consolidation Loan
Well, you have both options to avail a debt consolidation loan – traditional lenders and online lenders. There are various traditional lenders in the UK who offer debt consolidation loans, but the whole loan approval process is tedious. Moreover, you have to look for guarantors, collateral your asset, and submit various documents. You need to waste your precious time in comparing interest rates offered by them.
On the other hand, the various online top lenders in the UK offer debt consolidation loans at an affordable interest rate and you don’t have to furnish any guarantee. They don’t need to check your credit history. They happily offer bad credit debt consolidation loans without any guarantor.
How to Get a Debt Consolidation Loan Online?
It is very easy to apply for a debt consolidation loan online. You don’t have to go anywhere to submit your loan application and various supporting documents. You need to fill a small form present on a reliable lender’s website and submit it in a single click. Rest the approval process is quick and hassle-free. Various online lenders in the UK disburse the loan amount within 3 days of your application.
Tips to get the Best Debt Consolidation Loan Deal
You have to be highly careful before selecting a debt consolidation loan deal. You need to check various parameters before filling an online loan application form:
- Visit the websites of only reliable lenders in the UK
- Conduct a smart search to compare the interest rates and other services offered by the lenders
- Read customer reviews and check ratings of various debt consolidation loans
- Ensure there are no hidden charges or any upfront fee
- Carefully read the terms & conditions to avoid future problems
- Be ready with your total debt list and choose the single loan deal accordingly
- You can take an expert advice from a reliable broker
- Always take complete loan details from the customer care of the chosen lender
- The availed debt consolidation loan amount shouldn’t be higher than your total debt amount.
It is not easy to cope up with multiple loans and their monthly EMIs. Missed repayments and then poor credit score add more problems to your financial life. Availing a debt consolidation loan helps you a lot, but again, it is a big decision and you should take it smartly!