The global economy has suffered in recent years and the UK is no exception to this rule. People may soon find themselves deep in debt as they struggle to meet their daily needs. Debt consolidation loans can help to alleviate the stress by lowering monthly payments.
Types of Debt
Consumers often have debt from many different credit providers and sources. Common types of debt include:
Student loans
Vehicle loans
Outstanding balances on credit cards
Mortgages
Personal loans
Home renovation loans
Overdue house bills such as electricity bills, phone bills, etc.
These sources of debt can soon become overwhelming as people struggle to find a way to pay them all while at the same time providing the basic necessities of life for themselves and their families. It can be easy to lose track of the assortment of outstanding bills and the payments owed, making the total amount even higher.
What is a Debt Consolidation Loan?
A debt consolidation loan combines all of a person’s debts into one lump sum. The company providing the loan pays off each outstanding debt and the borrower repays the loan in monthly installments. There are different lengths of loans, with some lenders even allowing the borrower to choose the date of the final payment. This can be determined by how much is paid back each month. There are two basic types of debt consolidation loans: secured and unsecured.
Secured Debt Consolidation Loans
Secured debt consolidation loans use a borrower’s asset as collateral against the loan. This means that if the borrower defaults on the loan, the asset can be seized. These loans tend to have lower interest rates than unsecured loans because the asset is used to lower the lender’s risk. Homes and properties are generally used as securities in debt consolidation loans. Some lenders will allow people to borrow as much as 125% of the asset’s assessed value.
Unsecured Debt Consolidation Loans
Unsecured debt consolidation loans provide borrowers with the same lump sum loan, but without requiring an asset for collateral. The interest rate is usually higher because the lender’s risk is much greater. This may be the best available option for people with a lot of outstanding debt who don’t own their own home or property.
Benefits of Debt Consolidation Loans
Regardless of the types of debt accumulated or the type of consolidation loan chosen, there are many benefits to getting a debt consolidation loan. Most importantly, these loans can help consumers save large amounts of money. The interest rates charged on many of the outstanding debts may be much higher than the interest rate charged on a debt consolidation loan. Credit cards are especially notorious for having extremely high interest rates. A debt consolidation loan reduces your stress by allowing you to keep track of your debt with a single bill.
How to Apply for a Debt Consolidation Loan
Applying for a debt consolidation loan can be extremely complicated. There are loan companies with exorbitant fees, non-profit loan companies with lengthy and confusing application processes and a bevy of banks vying for your business. Each lender has different qualification requirements, application processes, payment plans and interest rates. It can be extremely tricky to find the right UK loan service to satisfy needs and provide the best service.
Free No-Obligation Quote
Luckily, we have a short online application that can be completed in just minutes. Our application form is confidential, free and there is no obligation involved. Once we receive your details, one of our experts will contact you by phone to discuss all of your options for debt consolidation loans throughout the UK.
Debt consolidation loans can be used to help solve the dilemma of many sources of outstanding debt. Fill out our free, fast and easy online form today to start tackling that mountain of debt right away.
