Cut your debt repayments with unsecured debt consolidation loans
Unsecured debt consolidation loans can be an effective way of paying off a number of smaller, independent debts.
By taking debt consolidation loans, consumers can manage unsecured debt, such as various credit card and store card borrowings, by amalgamating various strands into one single, manageable loan. This means one single monthly payment, rather than a number of payments, at a number of interest rates, to a number of lenders.
Unsecured debt consolidation loans are loans that are not linked to any form of security or tangible asset, such as your home or other property.
By collating all of your existing debts and paying them off by transforming them into one single unsecured debt, the repayments can be lower, and can run over a longer period of time. Unsecured debt consolidation loans can, therefore, be an efficient way to streamline and lower your monthly outgoings as well.
Do you need debt consolidation advice? Make a financial advice enquiry online, or freephone 0800 678 5929
When are unsecured debt consolidation loans the right choice?
Consider the example of a person with four individual pieces of unsecured debt : a bank loan of £5,000, a bank overdraft of £1,500, a credit card bill of £3,000 and a store card bill of £500. By taking a debt consolidation loan of £10,000 to pay off all these debts, that person may obtain a better interest rate than would apply to these loans individually (credit cards and store cards in particular are relatively high-interest types of unsecured debt), and could also extend the repayments period, thus reducing the payments even further.
It is important to note that, while unsecured debt consolidation loans can be an important step forward in managing unsecured debt, they do not mean that your debt has gone away. You have simply changed your repayment plan.
Debt consolidation loans give a better overview of your debt
Many find that with debt consolidation loans it is considerably easier to gain an overview of their debt and focus on one single monthly repayment, whereas before they found dealing with four lenders and various rates of interest rather confusing.
How much is available through unsecured debt consolidation loans?
As a very general rule of thumb, lenders may be prepared to consider consolidation loans of up to £15,000 on an unsecured debt basis. Amounts higher than that usually are taken on a secured basis, i.e. linked to your home or other property.
When offering unsecured debt consolidation loans, lenders will consider your income, other outgoings, and your previous credit record, before making their decision. The notion of ‘affordability’ also comes into play, and different lenders take different views on what they believe you can afford to repay. In general, the point of unsecured debt consolidation loans, as with all debt consolidation loans, is that your monthly outgoings should reduce and become more affordable, rather than increase.
While unsecured debt consolidation loans are attractive, in that they are not linked to your home or property, it is important to know that defaulting on repayments of unsecured debt could have unforeseen consequences. Lenders faced with customers unable to repay an unsecured debt can apply to the court for ’charging orders’, which transform unsecured debt consolidation loans into secured loans. This means that your loan would then be linked to your home, and in extreme cases your lender could require you to sell your house, in order to repay your debt.
For further information on unsecured debt consolidation loans, make a financial advice enquiry online, or freephone 0800 678 5929 now
