Debt Consolidation Loans
- How much debt are you in?
- Do you want to risk your property?
- Are you looking for stability or a quick financing solution to get back on track?
We live in a consumer-driven society, and the accessibility of credit cards and loans means it’s easier than ever to fund large purchases. However, what goes out, must come back in – and credit card interest rates can cripple people and put them in severe debt.
According to Statista, the average credit card debt per household from 2006 to 2019 ranged from £2157 to £2626, but the Covid-19 pandemic meant more families relied on their credit cards to pay monthly bills.
With so many issues surrounding credit cards and other debt, many people are desperately searching for a way out. Paying each credit card off monthly can feel like you’re taking two steps forward and five steps back.
Debt consolidation loans provide a welcome solution for individuals struggling to manage numerous creditors.
Believe Loans is an independent debt advice agency providing free support to people who need finance solutions.
Our expert team works hard to broker the best deal and help you get back on track, regardless of your circumstances.
What are debt consolidation loans?
Debt consolidation loans are one of the most valuable solutions for individuals struggling to pay off their credit cards. They allow you to borrow a lump sum of money from one lender and use it to pay off your outstanding debts.
Once you do this, you’ll enter into an agreement with a loan provider and make a monthly payment until you’re completely debt free.
There are numerous debts that you can include in a consolidation loan, including:
Credit card debt
The longer you leave a credit card, the worse the debt will become. If your debts mount up quicker than you can pay them off, you’ll also have hefty interest rates that continue to cause problems.
By consolidating these debts, you can reduce the interest rates and pay off your credit cards without worrying about the extra debts.
In many ways, store cards are similar to credit cards – but they can often be more expensive. Catalogues and other retailers let people buy items in advance and pay them off later, which seems like a great idea.
However, the interest rates on these store cards are often higher than credit cards – especially when you factor in large purchases.
Unsecured personal loan amounts
There are numerous personal loans, and you’ll often need to pay unsecured ones back quickly. Whether it’s a payday loan or outstanding car repayments, these debts can mount up, and the interest rates can be shocking.
Overdrafts are meant to give people some breathing space between paychecks, but if you find you’re deep into your limit, it’s almost impossible to get out. Every time you get paid from your employment or other money that goes into your account, it immediately incurs interest.
Some people use the loan to get out of their overdraft, ensuring they can pay back their consolidation loan and avoid extra interest fees.
You might not know this, but you can consolidate some utility bills too. These include your gas, electric, TV and mobile phone debt, private medical treatments and personal lines of credit.
How debt consolidation loans work
In general, two debt consolidation loans available; secured and unsecured. Both have advantages, and you might find that you’re only eligible for one, so there’s limited choice.
Secured debt consolidation loan
A secured debt consolidation loan requires you to use collateral as security.
Most people use their home as equity, but if you want to borrow a smaller sum of money, you could offer a car or other valuable items as collateral (as long as they cover the amount).
One important thing to remember about secured debt is that you can only borrow against your own. For example, say you want to offer your £300,000 property as collateral, but the mortgage amounts to £230,000; the maximum amount you can borrow is £70,000.
Unsecured debt consolidation loan
Unlike a secured loan, backed by collateral, an unsecured loan is not supported by any assets, so you’re not sacrificing your property. However, these loans are usually only available for people with a good to excellent credit rating, as lenders want peace of mind.
Most loan providers expect you to pay an unsecured loan back quickly, so they’re not suitable for some people. Also, if you fail to make repayments, you’ll still have to deal with bailiffs.
Why choose a proper loan over credit cards or other alternatives?
If you’re wondering which type of loan suits your needs, you’re not alone. Both secured and unsecured loans have pros and cons, but you should check to see whether you’re eligible before making a decision.
Secured consolidation pros:
Lower interest rate: Most secured loans have lower interest rates because you’re offering security to the lenders.
Borrow more money: A secured debt consolidation loan could be the best solution if you want to borrow a lot of money. Sometimes, you can borrow more than £100,000, depending on your circumstances.
Pay it back over time: Nobody wants to owe money, and secured agreements mean you can pay the loan over the years instead of months.
Unsecured consolidation pros:
Zero collateral: If you don’t own a home or have limited assets, you won’t be eligible for a secured loan. However, unsecured loans are available regardless of your assets.
Easier arrangements: Secured loans can take longer to arrange, but an unsecured debt consolidation loan often has a quicker arrangement process.
Secured consolidation loan cons:
The risks: If you get a debt consolidation loan but fail to pay it back, you could lose your home or other valuable assets.
Variable interest rate traps: Some lenders will offer variable interest rates, which means you won’t enjoy one fixed monthly payment. However, a good broker can help you avoid this trap.
Unsecured debt consolidation loans cons:
Credit history: If you have a poor credit history or your credit score is fair, you won’t qualify for an unsecured loan. They’re hard to get, so people often find other solutions.
Shorter repayment plan: Unsecured arrangements usually last up to seven years, so some people notice they have high monthly repayments.
You could still lose valuable items: If your personal circumstances change and you can’t make your monthly payment, you could still face action from the loan provider. They could bring in the bailiffs, or you might have to attend court.
Which loan arrangement is best?
If you have a good credit rating and own your property, you’ll have more choices available for your needs. When choosing the right solution, it’s essential to consider the following factors:
How much debt are you in?
Do you want to risk your property?
Are you looking for stability or a quick financing solution to get back on track?
Secured loans are best for people who want to consolidate their existing debt and pay a monthly fee for many years. In contrast, unsecured personal loans are much better if you want to roll your existing debts into one payment and then free yourself of debt ASAP.
The alternatives to debt consolidation loans
A debt consolidation agreement is one of the most popular borrowing solutions, but some prefer to explore other options. There are some available, but each comes with its disadvantages.
Balance transfer credit cards
Balance transfer credit cards are one of the most accessible solutions for consolidating debts, and they can be beneficial – if you use them properly. Most credit cards come with an introductory 0% interest rate, which lasts from a few months to over a year.
The main problem with these credit cards is that the interest rates often rise quickly, which means you’ll pay more in the long run.
Also, a balance transfer fee applies, usually around 3% of the amount you transfer.
Home equity line of credit
A home equity line of credit (HELOC) is a loan that uses the equity in your home as collateral. Your home equity is subjective because it depends on how much money you still owe on your mortgage, so if you have a large mortgage, you won’t be able to borrow huge sums of cash.
While a HELOC lets you borrow a certain amount against your equity, the interest rates are valuable, which can cause problems.
Take control of your finances with Believe Loans
If you’re in debt, there are two things you can do:
- Struggle alone and let your debts build up.
- Talk to a specialist loan advice company and tackle the problem.
Believe Loans is a loans broker dedicated to providing the best possible solutions for your financial requirements. When you choose us, you can effectively consolidate your debt and get back on track.
With many solutions available for all financial circumstances and credit ratings, we’re confident you won’t find a better service.
Speak to a trained financial advisor
Our financial advisors are fully trained in sourcing the best loan providers for each client’s needs. You can call us anytime for free debt advice, and we’ll learn more about your circumstances.
We put your needs first
Everyone has different debts and borrowing needs, so it’s essential to document all your existing debts and creditors. You might be able to choose from a range of loans if you have a good credit score and collateral, but we also work with low credit scores.
Choose from a range of lenders
Believe Loans partners with a range of providers, and we do all the leg work for you. Our access to these loan companies ensures we can find companies willing to work with you.
With loan amounts up to £500,000 and low-interest rates, you’ll get to choose from an extensive selection of lenders with excellent incentives.
Pay nothing upfront
As a loan broker, we charge a small fee for our services. However, the good thing is we add our fee to your loan, so you won’t have to worry about upfront cash. Once you enter into the loan, you make just one monthly payment and finally get control over your debts.
Achieve financial freedom with our dedicated service
If you’d like to learn more about our debt consolidation loans, please feel free to get in touch with our friendly customer service team. We’re available to help you compare loans and find the right solution for your needs.
Debt might seem like a never-ending merry-go-round, but with us on your side, you can recover and look forward to a brighter, stress-free future.
Why not just use a debt relief order?
Debt relief orders might seem like an easy way out, but writing off the majority of your debts does have some negative consequences. You’ll find it harder to get loans in the future, and using this solution will also result in a low credit score.
Paying back your debts shows you’re willing to take financial responsibility, which will benefit you in the future.
Why use believe loans instead of going straight to the company?
We’re not a lender but a loan broker – which means we can offer financing solutions from numerous providers. When you go to one loan provider, your choices are limited – but our brokers will always find you excellent terms and lower interest rates.
Do debt consolidation loans hurt my credit?
As with any borrowing solution, a debt consolidation loan can impact your credit file if you don’t make the repayments on time. Also, you shouldn’t take out any lines of credit while paying back the loan.
However, when managed correctly, a debt consolidation loan lets you build your credit score again because it shows you can take responsibility for your debts.
Do I pay less than if I keep my current credit cards?
You can end up paying less because the monthly repayments when you consolidate debt are lower than dealing with credit card interest rates. However, you can clear your existing debts with lower loan rates and one monthly repayment.
Can I pay existing loans early?
Most borrowing solutions come with loan repayment terms; in some cases, these providers might charge an early repayment fee. You should always check the fine print before entering into an agreement because you might find better terms from certain providers.
How It works
Simple, easy application
We search our panel of lenders to find the deal that’s right for you
When you confirm your chosen deal, we get your application moving
The money lands in your bank
account – usually within two weeks
We compare loans from our panel of the UK’s top lenders to get you the best deal.
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