A debt consolidation loan, as the term implies, is a loan borrowed to consolidate the past debts into one. One loan is easier to manage. Other benefits that a debt consolidation loan offers are:
Only one creditor, which means we will not receive frequent calls from our creditors reminding you about the payment date
Reduced or fixed interest rates (because the loan is one)
Long repayment term
A debt consolidation loan could be secured or unsecured. A secured debt consolidation loan requires you to furnish collateral. Since it is low-risk loan product for the lender, he offers the following advantages to the borrower:
Low monthly instalments
Easy terms and conditions
Low interest rates
Long repayment term
However, due to the evaluation of the collateral involved, a secured debt consolidation loan takes a long time to be disbursed. Also there is lot of paper work.
For an unsecured debt consolidation loan, you don't have to offer collateral. Lack of collateral makes the loan a high-risk product for the lender and he is forced to charge higher interest rates. But, despite the high interest rate, one can go for the unsecured debt consolidation loan due to the following advantages:
Fast processing due to lack of collateral
Fast disbursal due to the same reason
Less documentation
High success rate of applicants
Absence of risk
People with adverse credit record can procure a debt consolidation loan as well. Most of the lenders understand the fact that a person having multiple debts may have arrears, defaults, county court judgements (CCJs), or bankruptcy against their name. Though the interest rates for people with poor credit records are higher, there is little hesitation on part of the lenders as far as disbursal of the loan is concerned.
There are hundreds of lenders in the UK loan market offering debt consolidation loans. It is therefore necessary that the borrowers first compare their rates before deciding which lender to go for. Applying for a debt consolidation loan just after accepting one quote may land the borrower into trouble. There are too many predatory lenders waiting for them.
The last but not the least: the application for the loan should be made online. This saves time for the borrower and helps him avoid unnecessary paper work.
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