Our Quick Guide To Debt Consolidation Loans

Want to be able to take more control of your finances? There is a solution, a debt consolidation loan, a debt consolidation loan allows you to merge multiple debt repayments into one, this will make it more manageable and affordable, as well as help you when it comes to saving on interest payments. Take a look at our quick guide to debt consolidation loans.

What is a Debt Consolidation Loan?

Essentially, a debt consolidation loan will allow you to merge all your debts into one. You would take out a loan to cover existing debts, then repay the lender in single monthly instalments. You could use a debt consolidation loan to consolidate most unsecured debts – eg credit cards, store cards, and personal loans.

You might find a single loan repayment more manageable than several bills throughout the month. And in some cases, you could save money on interest – if the loan interest is cheaper than your other accounts combined.

Our Quick Guide To Debt Consolidation Loans – What Are The Pros and Cons of a Debt Consolidation Loan?

There are a few factors to consider before you take out a debt consolidation loan. And you should look at them in terms of your personal circumstances:

Budgeting and Managing Finances

In some cases, a debt consolidation loan can make it easier to manage finances. You would merge a number of monthly payments into one. And you can agree to pay it on a date that suits you. The terms are usually flexible; you can set an affordable monthly repayment amount from the start. But always remember that the lower your monthly payments are, the longer your loan term will be – so you will pay more interest. Debt consolidation can work if you stick to a budget, and make sure you can repay the loan on time and in full.

Interest Rates

Debt consolidation may save you money in interest. You could end up paying a lot of interest if you have several high interest debts, like credit cards. And in some cases, you might pay less interest on a single debt consolidation loan – depending on the rate offered. However, if you choose to repay the loan over a longer term, you will probably pay more interest overall. Before you take out a loan, work out how much interest you would pay – and if you would actually save money.

Our Quick Guide To Debt Consolidation Loans – Your Credit Score

A debt consolidation loan can be both good and bad for your credit score. A single monthly bill may be more manageable than a number of debt repayments. It may help you budget and meet payments, on time and in full. Good financial habits like this can – over time – improve your credit score. 

However, any late or missed payments can damage your score. As can applying for a loan; the lender will perform a hard credit check, which a[[ears on your file. Closing accounts could also negatively impact your credit score, even though they have been repaid.  Having accounts open shows you have a longer history of taking out – and repaying – credit. Plus, having fewer accounts means you have a lower credit limit. And if you are still in debt, you will have used a larger percentage of that credit limit. Keep your oldest account open – even if its balance is zero. It will show that you have a longer, more stable relationship with lenders,

So, is a Debt Consolidation Loan right for me?

A debt consolidation is not the answer for everyone. But if you know you can meet the payments, and it won’t end up costing you more, a debt consolidation loan could help you. You could even save money. Just remember to:

  • Make sure your payments are affordable
  • Know exactly how much interest you will pay before you sign for the loan
  • Avoid using any more credit
  • Be strict with yourself – make a budget and stick to it.

If you are really struggling with debt, there are plenty of organisations that can offer free, confidential debt advice. They can talk you through your options and help you decide what is best for you.

Our Quick Guide To Debt Consolidation Loans – What Can Moolr Do For You?

A Moolr consolidation loan could be for you if you are looking to consolidate numerous debts into one convenient place and payment.