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A Guide To Debt Consolidation Loans

Over the years, many people have found that it is a lot easier to get into debt than it is to get back out of it. It is also generally a lot more fun getting into debt than getting out– but all fun eventually has to be paid for. When the bill finally comes due, people often discover that the numbers aren’t going to add up and they have a big, catastrophic problem on their hands.

Apart from just eating Top Ramen for five years, there are generally two avenues available for people to ease their way out of the mess they find themselves in. The first is to surrender and go the bankruptcy route, which is quite humiliating as well as severely damaging from a financial health standpoint for many years to come. The second is to look at a debt consolidation program that can cut your monthly payments down to a manageable level and allow you the peace of mind to actually sleep at night and start answering the phone once again.

Types of Debt Consolidation

There are two basic types of debt consolidation loans– secured and unsecured. A secured loan is one where you put up some form of underlying guarantee such as a car title or your house as a way of letting the lender know that you are serious. The other is an unsecured loan, which is more commonly accessed by those in trouble since they seldom have a lot of unencumbered assets to put up as collateral.

The Secured Loan

The purpose behind a collateralized loan is to secure more favourable terms for the recipient. These loans generally offer lower interest rates and therefore have lower monthly payments for the same amount of debt relief as a non-collateralized loan. Such loans may also be approved for higher amounts than otherwise.

The Non-Secured Loan

On the other hand, the non-secured loan comes with a higher interest rate due to its inherently riskier profile (from the lender’s viewpoint). It thus means that higher monthly payments will be needed in order to achieve the same bang as a lower-cost secured loan. This also often means that the loan’s length will be longer since more of the monthly payment goes to service the interest rather than pay down the principal balance.

Getting the Loan Is The Easy Part

No matter how much paperwork might be required to get a debt consolidation loan of either type, the real work begins once the loan closes. At that point, you will have a lot more financial breathing space than you had before, and you may well think that your troubles are all behind you. That may well be true but this is not the time to celebrate. Your debt hasn’t disappeared, it has just been reorganized.

You may now have some accounts that suddenly have zero balances. They need to stay that way. If yo go out and charge everything right back up to the limit again, you now have double the problem you once had– plus you have no further recourse to a debt consolidation loan. This brings up another important point.

Pitfalls To Avoid

As can be seen by the example above, some strict financial discipline is required to make this process a success. A debt consolidation loan is a second chance. You might throw it away by not learning your lesson from the first go round. In addition, you must be especially vigilant in the time between applying for and receiving debt consolidation assistance. Missing payments or activating new credit lines can result in a re-assessment of your basic creditworthiness. This could lead to you losing your loan before it is even issued, or else you might find yourself paying higher interest rates because of some last-minute blip.

Self control is the main commodity you must offer when it comes time to seek out help for a previous debt problem. Everyone makes mistakes in life, or sometimes gets themselves into an unforeseen jam that isn’t easy to escape from. Those are the people that debt consolidation is designed to help. Be worthy of the helping hand that is extended to you and don’t forget to pay it forward once you’re back on your feet again.

7.8% APRC Representative

Representative example: Assumed borrowing of £37,700 over 180 months, with a fixed borrowing rate of 6.4% per annum for the first 36 months, followed by 144 months at the lenders standard variable borrowing rate of 5.9%. There would be 36 monthly instalments of £356.89 followed by 144 instalments of £347.59. Total amount payable £63,021 comprised of; loan amount (£37,700); interest (£21,791); Broker fee (£3000) Lender fee (£530). This would result in an overall cost of 7.8% APRC.

 

Accepted.co.uk is a trading style of Paloma Digital Limited. Paloma Digital Limited is an introducer and we will search our panel of brokers to find the right loan for you. Data Protection Registration Number: Z9868049.

Paloma Digital Limited is authorised and regulated by the Financial Conduct Authority. Firm registration number 769794. See www.fca.org.uk

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.

 

7.8% APRC Representative

Representative example: Assumed borrowing of £37,700 over 180 months, with a fixed borrowing rate of 6.4% per annum for the first 36 months, followed by 144 months at the lenders standard variable borrowing rate of 5.9%. There would be 36 monthly instalments of £356.89 followed by 144 instalments of £347.59. Total amount payable £63,021 comprised of; loan amount (£37,700); interest (£21,791); Broker fee (£3000) Lender fee (£530). This would result in an overall cost of 7.8% APRC.

Accepted.co.uk is a trading style of Paloma Digital Limited. Paloma Digital Limited is an introducer and we will search our panel of brokers to find the right loan for you. Data Protection Registration Number: Z9868049.

Paloma Digital Limited is authorised and regulated by the Financial Conduct Authority. Firm registration number 769794. See www.fca.org.uk

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.

IF YOU ARE THINKING OF CONSOLIDATING EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY.

Paloma Digital Ltd. Company Registration No. 6934249. Registered Office: Office 229, 275 Deansgate, Manchester M3 4EL.