Loans thatâs enable the borrower to condense all his monthly outgoings into a single payment are debt consolidation loans. This is done by paying off outstanding balances on existing loans, credit cards, store cards and overdrafts. Borrowers can get a low rate of interest on the new loan and a longer repayment period that may help him in making the monthly installments more manageable. You should take a debt consolidation loan if
1. You are paying only the minimum monthly balance on each loan
2. The amount you owe on credit cards and store cards rises every month
3. You are in a risk of repossession of you home pledged against secured loan
4. You have many secured and unsecured personal loans at different APRs, taken from different lenders
5. You put off paying bills until the final reminder
What are the types of debt consolidation loans ?
Debt consolidation loans can be secured as well as unsecured. They are discussed below.
Secured Debt Consolidation Loans- As the name suggests, these loans demand a security in lieu of the loan amount. Secured loans attract a very low APR and thus, are profitable and cost-effective borrowing options. The borrowers can also have flexible repayment options with secured debt consolidation loans.
Unsecured Debt Consolidation Loans- Unsecured debt consolidation loans are preferred most by the borrowers as these loans don't require the borrower to pledge his home as collateral. Though these loans may call for a comparatively higher APR than their secured counterpart, they are still risk free options.
Can one avail bad credit consolidation loans ?
Yes, there are many lenders in the UK loan market who help you to merge your several debts into a single amount even if you are suffering from bad debts due to arrears, defaults, CCJ or bankruptcy. In fact, most borrowers who apply for debt consolidation loans have a poor credit record and that is the reason they want to consolidate all their debts and start afresh.
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