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The Disadvantages Of Consolidation Loans

In our previous article, we took a look at the advantages of consolidation loans. But we do not want to give off the impression that these loans can only be good. All borrowing comes with pros and cons. So we also take a look at the disadvantages of consolidation loans.

Disadvantages Of Consolidation Loans – It May Cost You Money

Do not assume that by moving into one handy monthly payment and loan, you are better off financially. Convenience does not have to go hand in hand with greater financial security. Some may consider a consolidation loan the best option even if it does cost them more money. The reason for this would be because they think it preferential to swap to lower monthly repayments, even if it means paying more back in the long-term. As always, do what best suits your personal circumstances.

Credit Scores Can Be Affected

You improve your credit score by making regular repayments. Lenders show trust to those that do so, and thus are more likely to lend to them. But if you have multiple cards and make your repayments, then you actually are displaying your reliability more than if you make just one repayment each month.

Disadvantages Of Consolidation Loans – Convenience Is not Everything

With the advent of direct debits and online banking, it has never been easier to make repayments on debts. No need to manually log in and fill in forms or travel to a bank or building society. Nor post a cheque off. So is it really such a huge advantage to consolidate loans into one monthly payment? I guess that is for individuals to decide.

Fees

Moving money across to a new card or loan provider is rarely free. There may be admin fees or other costs involved in doing so. So do consider this before proceeding with a consolidation loan. It may be better to simply continue on your existing path, or perhaps if possible increase your monthly repayments on existing debts. This way you pay them off quicker.

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