Top Questions People Ask Us
A debt consolidation loan allows you to move one or more of your existing debt into one place to make it more manageable. Customers typically move their credit card, store card or other forms of loans.
The APR makes it easy to compare different loan products across the market.
The representative APR is the rate a provider reasonably expects most applicants to receive. It’s not a guarantee – your personal APR could be higher or lower than the advertised, representative APR.
The APR you receive may vary from the advertised rate. This is the representative rate which we expect most people who apply to get.
The rate you are offered will be a personalised rate based on your current individual circumstances, including credit information held about you by credit reference agencies, the loan amount you borrow and length of time you borrow for.
We offer a Fast Checker quotation tool which enables you to find out how likely you are to be accepted without impacting your credit score. All you need to do is provide a few details. Find out more by clicking our Fast Checker tool
Yes. A credit check will be completed to help us make a decision on your loan application. Please read our decision explained leaflet for more information on how we assess your application.
Yes you can, however, before applying for a debt consolidation loan you should review your options to make sure that the loan which you are considering is right for you
Still have questions about loans?
Other Debt Consolidation Mortgage Loan Options
A cash-out refi isnt the only way to consolidate debt into your mortgage. You could also get a home equity loan or home equity line of credit .
- A home equity line of credit works a lot like a credit card you can draw from the funds as needed but its secured by your home equity which means a lower interest rate
- A home equity loan gives you a lump sum at closing that you can use to pay off your debts
Both HELOCs and home equity loans can charge closing costs and/or origination fees.
HELOCs usually have an adjustable interest rate thats based on the prime rate plus a margin home equity loans usually have fixed interest rates.
Can I Get An Installment Loan With Bad Credit
While a high credit score can improve your chances of getting approved for an installment loan, it’s possible to get a loan if your credit score is lower. You should expect to get approved at a higher interest rate, and may be required to pay extra fees, such as origination fees .
Check out CNET’s picks for best loans for bad credit.
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Soft Searches For Debt Consolidation Loans
If you’ve decided to look into a debt consolidation product, you should be aware that the best deals will only be available to customers that the lender judges to have the best credit scores.
What’s more, if you apply for a loan that you find appealing and get rejected, this will leave a mark on credit files and lenders may use this to lower your credit scores further.
That’s why it makes sense to make a soft search for loans before applying.
If you use GoCompare’s soft search loans tool you’ll then only see the deals that you’re likely to qualify for, giving you a better idea of the actual rates available to you and helping you make the right application.
What Are Alternatives To Debt Consolidation
Well, heres the very best one possible: the debt snowball method. With this alternative to debt consolidation, you arent focused on moving around or combining your debtsyoure working on paying them off. Every. Last. One.
Heres how it works. List your debts smallest to largest . Pay minimum payments on everything but the smallestyoure going to throw everything you can at this one to pay it off as quickly as possible.
Once that debt is gone, take all the money you were paying toward it and apply it to the second-smallest debt. Keep making minimum payments on the rest.
Its like a snowball plowing down a hill at top speednothing can stop the momentum and nothing can stop you! Keep going until every single debt is gone.
Yupgone. Not settled or balanced . Not somewhere else with a different interest rate. Gone.
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Is It A Good Idea To Consolidate My Debt
Consolidating your debt with a loan can have several benefits:
- Simpler budgeting. Instead of wading through various statements and juggling multiple payments, youâll make one set monthly payment on the same date each month
- A clearer view of your debt. Having all your debt in one place can make it easier to see how much you owe, how quickly youâre paying it off, and how much interest youâre being charged
- Potentially lower rates. You may be able to reduce the amount of interest youâre paying by consolidating your debt under one lower interest loan
What Is A Debt Consolidation Loan
- A debt consolidation loan can lower your payment, reduce your interest rate, and simplify your debt management.
- Debt consolidation loan types include home equity loans, personal loans, and balance transfer credit cards.
- The best debt consolidation loan for you depends on your credit rating, amount of debt, and homeownership status.
Consumers use a debt consolidation loan to consolidate or combine multiple debts into one. The debt consolidation loan can merge credit cards, medical bills and other types of debt. Getting approved for a debt consolidation loan typically hinges on your credit scores and income.
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More Information On Debt Consolidation Loans
Weve covered many of the FAQs from debtors about how to qualify for debt consolidation loans. If you didnt find what you were looking for above, weve probably covered it in one of our other consolidation debt guides. Head back to the Money Nerd site and search for your question now.
And remember there are many excellent UK debt charities waiting to help you. They offer free private debt advice to help guide you through the process and recommend the most suitable debt solution based on your personal situation.
Some of the most popular charities include Step Change and National Debtline. If youve just started thinking about debt consolidation, pick up the phone and have a chat with a trained advisor!
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What Should I Consider Before Taking Out A Debt Consolidation Loan
Before borrowing any money, its important to make sure you choose the right product for your needs.
Can I afford the new repayments? ask yourself whether you can afford to make the repayments now and in the future?
Could I save money? is the cost of a debt consolidation loan lower than your existing borrowing?
What fees will I be charged for repaying my existing borrowing? does the amount you save by consolidating your debt offset any fees you will be charged by your existing lender when you pay off the debt early?
If youve made the decision to take out a debt consolidation loan then RateSetter may be able to help:
New to RateSetter? A RateSetter unsecured personal loan can be used to streamline your existing borrowing into one affordable monthly payment. It could also save you money every month in interest. Find out more.
Already have a RateSetter loan? You may be eligible to consolidate your existing borrowing with your current RateSetter loan or take out a new loan. .
If youre worried about debt, you might find it useful to visit The Money Advice Service, which has further information about debt management and offers free debt advice.
What To Consider Before Applying
If you want to use a personal loan to consolidate existing debts, its important to assess whether doing so will definitely save you money overall.
To do this, first check whether you will have to pay any early repayment charges for clearing your original debts before the end of the term. If so, this may outweigh any savings youd make by taking out a personal loan.
Next, consider exactly how much you need to borrow and assess whether you are likely to be able to borrow that amount.
Youll also need to think about how long you need to repay the amount borrowed remember that if you choose a longer loan term, your monthly repayments will be lower, but youll pay more in accumulated interest.
If it looks like youll end up paying more for a personal loan than if you kept your debt where it is. If you dont think youll be able to afford your new single monthly repayment, a personal loan is unlikely to be your best option.
Likewise, if you are fairly close to settling your existing debts, consolidating them is unlikely to make good financial sense.
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How To Get A Debt Consolidation Loan With Bad Credit
At Experian, one of our priorities is consumer credit and finance education. This post may contain links and references to one or more of our partners, but we provide an objective view to help you make the best decisions. For more information, see our .
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If your FICO® credit score is below 580, managing your finances with debt consolidation might be difficult. But if you have “fair” or better credit and can get approved for a debt consolidation loan, it can be an easy way to lower your monthly payments, reduce the number of creditors you owe and shorten the time it takes to pay off your debt.
Debt consolidation is a method of taking out a new loan to pay off the high-interest debt in an effort to streamline monthly payments and save money over time. People typically use personal loans, low-interest credit card balance transfers, or debt management plans to consolidate their debt.
What Are Debt Consolidation Loans
Debt consolidation loans are personal loans used for the purpose of paying off other debts. Its not uncommon for banks and other lenders to advertise loans for specific purposes. For example, you can get a car loan to buy a new vehicle, a home loan for home renovation and you can buy a property with a mortgage, which is also a type of loan.
You might be able to use a personal loan not advertised for the purpose of debt consolidation to consolidate your debts. Always check the fine print to make sure this is the case before applying for a generic personal loan.
These loans are usually offered with fixed rates of interest or with variable rates that are fixed in the beginning but can then fluctuate. If you prefer the peace of mind of knowing exactly how much your loan amounts/payments will be each month, you should look for loans with fixed rates only.
All loans are subject to credit checks. Only ever apply for a loan from a lender that is authorised and regulated by the Financial Conduct Authority . Avoid loan sharks and online scammers.
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Managing A Debt Consolidation Loan
If you are able to consolidate your debts with a loan or some other form of debt relief program, you have taken a step in the right direction, but improving your credit score and eliminating debt is typically a 3-to-5 year journey.
Youve already taken the most important one looking for help but there are a few more things you can do to improve the chances of success:
- Make a budget. The easiest way to improve your financial situation is to create an honest, affordable budget. Look at it every month to see if there isnt one more expense you can cut or one more source of income you can add.
- Pay on time! Pay at least the minimum on every credit card and the maximum your budget will allow. That alone will improve your score.
- If you could put your credit cards away for a month, it would be great. If you stretch that to six months, your results would be fabulous.
- Track your progress. If you have a bank loan or are in a debt-relief program, call them and verify where you stand. Success will breed success!
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There Are Two Types Of Debt Consolidation Loan
Debt consolidation loans can be either secured or unsecured. If you own your home, a second mortgage may be a good option for you. Whilst youll be putting your home at risk, a second mortgage allows you to borrow more at a lower rate of interest and over a longer term than unsecured loans. This means you can reduce your payments as far as possible, freeing up more of your monthly cash for lifes essentials.
An unsecured loan, also known as a personal loan, is not secured against any asset. If you cant keep up with repayments for an unsecured loan, the loan company will not be able to repossess your home, but your credit rating will be affected.
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Debt Consolidation Loans That Dont Put Your Home At Risk
A better option might be a 0% or low-interest balance transfer card. But you’ll need to consider if a fee will be applied to the balance transferred.
This can be the cheapest way provided you repay the money within the interest-free or low-interest period.
Keep in mind that youre likely to need a good credit rating to get one of these cards and might have to pay a balance transfer fee.
You might also consolidate your debts into an unsecured personal loan, but again, youll need a good credit rating to get the best deals.
Find out more in our guides:
How Do Debt Consolidation Loans Work
Debt consolidation loans work by allowing borrowers to consolidate their existing debts into one loan. Consolidating your debts in this way means youll only have to make one simple monthly repayment rather than multiple.
For a debt consolidation loan, youll have to work out the total amount you owe from all your existing debts. This total debt figure will then be the amount you borrow through the debt consolidation loan. Your debt consolidation loan will then pay off all of your existing debt, and leave you with just the debt consolidation loan itself to pay off. Once your debts have been paid off, youll then need to start paying off your debt consolidation loan. Youll have a set term in which to pay this loan off, which will be required in monthly instalments.
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Debt Consolidation Mortgage Pros
The obvious benefit of a debt consolidation refinance is that youll save money by lowering the interest rate on your outstanding debts. This could save you a huge amount of money in the long run.
Say you had four or five credit cards with interest rates in the 18% to 25% range that are at or near their credit limit, says Bruce Ailion, Realtor and real estate attorney.
Assume you are making minimum monthly payments, too. Not only will you likely never pay these off. Youll also pay a great deal in interest.
Now imagine that you consolidated all of these debts into one loan with an annual percentage rate below 4%.
You would save big money. In fact, the savings youll reap on paying less interest could be applied toward the principal, Ailion says. That means you can pay off the entire debt quicker.
Consolidating your debt can also improve your . It helps by lowering your credit utilization ratio, which is the percentage of your total credit limit that youre using at any given time.
Plus, mortgage interest can be tax-deductible. Check with a tax professional if youd like to claim this deduction.
How Does Debt Consolidation Affect Credit Scores
Missed repayments can have a negative effect on your credit report, which may indicate to lenders that you have trouble paying back loans. Finding a more manageable way to make repayments, such as a consolidated loan, could reduce the chances of missed payments and defaults. However, its also important to get independent advice about how a consolidated loan might affect your financial future, not just how it will affect your credit report.
Applying for a consolidated loan will also leave a footprint on your â this is known as a . Trying to take out lots of different loans in a short space of time may also indicate to lenders that you are overly reliant on credit. This may also negatively affect your chances of getting credit in the future.
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What Does It Cost To Consolidate Debt
It always costs money to borrow money, which is why you want to find the debt consolidation option with the lowest APR to save yourself the most money in the long run.
Different debt consolidation options come with their own set of interest rates and fees. For example, some personal loan lenders charge origination fees, while a home equity loan can incur appraisal fees and closing costs. Even a credit card balance transfer can come with a fee.