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What Is A Debt Consolidation Loan?
A Debt consolidation loan is personal loan that is used to downsize your debt. You take debt from multiple sources and merge it into just one easy to manage primary source. If you have multiple loans that you are struggling to manage, then a debt consolidation loan could be the solution. Ultimately, debt consolidation loans allows you to pay off your past debt, and continue to pay off this loan in instalments, just like you would any other credit. If you want to consolidate credit card debt, for example, this would be the ideal solution.
Why Should you Take out Debt Consolidation Loans with iThink Finance?
• No Fuss, no fees.
• Secure online application.
• We pride ourselves on providing exceptional 5*, 24/7 customer service.
• We work with an esteemed panel of the top UK lenders in the industry.
• We offer flexible and affordable monthly repayment periods of 12-72 months.
• Competitive rates on your personal loan.
• Loans for every purpose up to £20,0000.
|Annual Interest Rate||150% pa (Fixed)|
|Total Amount of Credit||£850|
|Loan Duration||11 Months|
|Total Amount Repayable||£1,609,25|
|Total Charge of Credit||£759.25|
|Monthly Repayment Amount||£146.30|
If you're making multiple payments to different lenders each month, it's likely that you've lost track of how much interest you're paying and to whom. Before applying for a debt consolidation loan, make sure that you calculate interest on current loans. This can help you to see whether you'll end up saving money or paying more by taking on additional debts.
How to Consolidate Debt How do Debt Consolidation Loans Work?
You can consolidate your debt through a few different methods. However, the most traditional method of debt consolidation is by taking out a personal loan. Consolidating your debt works by taking out an unsecured debt consolidation loan to repay your multiple debts in one payment each month, alternatively to several. Unsecured debt consolidation loans make it easier for people to manage their finances, and to make their debt more affordable to repay. This is how unsecured debt consolidation loans with iThink Finance work. Find out how to consolidate debt below.
1. Decide on a Loan Amount & Term
First and foremost, you should make a note of all the debts you want to consolidate as well as the total amount of monthly debt you need to pay. Now you can decide on a loan amount and term for your debt consolidation loan. We offer loans from £1,000-£20,000, and repayment periods of 12-72 months.
2. Provide Some Personal Details
After you have decided on your loan amount and term, you will need a few details to hand so that we can make the necessary assessments on your application. We will need the following details from you:
• Forename and surname
• The purpose of your loan
• Date of birth
• Email address
• Contact number
• Marital status
• Number of dependants
3. Receive an Instant Decision
Once you have submitted this information, we will quickly evaluate your application and match you with the best lender for your needs. We know how frustrating it can be to wait around, so you will receive a decision on your loan within seconds. Receive debt consolidation loans instant decision today!
4. Make Repayments on your Loan
Once you have been accepted, the money will be deposited directly into your bank account. Now all you have to do is repay your monthly debt as you would with any other loan. Sit back and relax knowing you only have one monthly payment to keep up with rather than several.
One of the best things about debt consolidation loans is that the loan terms are renegotiated. So, if you've been stuck with unfavourable loan terms then you're in luck. This is an opportunity for you to get a new interest rate, a new repayment term, and more importantly - a new loan instalment to pay. That means that you can set it up so that you pay less every month, thus making the loan more affordable.
Is it Bad to Consolidate your Debt? Is it a Good Idea to Consolidate your Debt?
Yes, it is a good idea to consolidate your debt if you find yourself in a vulnerable financial position and are looking for a way to make your debt more manageable and affordable. However, they are not for everyone. Now you've read and understood some of the basics about debt consolidation; you still may be wondering whether it’s the right option for you. In this following section, you will find everything you need to know about who debt consolidation loans are suitable for and all the available information to see whether you could be a suitable candidate for debt consolidation loans.
Where are Debt Consolidation Loans Helpful?
When your debt is in multiple places, each one of your loans is going to come with its own set of specific details, such as:
Instalment date, etc.
When Should You Get A Debt Consolidation Loan?
Debt consolidation is quite a multifaceted finance option and can help in a number of different personal circumstances. Here are just a few cases of instances where a debt consolidation loan could come in handy should you find yourself in that situation.
• When You Can't Afford To Repay All Of Your Loans
More debt means more money to repay, and after a while, you might find that it is starting to become increasingly difficult, if not impossible. Some instalments will have to be skipped in favour of others, which will undoubtedly attract an adverse credit rating, meaning you might have to deal with some very irate lenders. However, did you know that when you consolidate your debt, you can sometimes reduce the amount you owe, and the interest rate? Keep that in mind as it can help with your affordability.
• When You Find It Difficult To Manage Your Repayments
Do you remember if you repaid all of your loans last month? Moreover, how much did you pay for each? Read More »
Do you know how much you have left to repay? What days do you make your repayment? What about how much interest you're spending on each of your loans? If a lender threatened you for not paying, would you even know if they're trying to scam you or not? If it becomes too confusing to keep track of all of your payment plans, then it's time to streamline and consolidate under just one loan. You have one payment to make, in one place, once a month.« Show Less
• When You Want To Improve Your Credit Score
Bad credit influences your borrowing experience in the worst kind of way. It can hinder you by limiting the amount you can borrow, your repayment term, and by increasing your interest rate, all to accommodate the risk you represent to the lender. Read More »
However, you can help to improve your situation - and your credit score - all by consolidating your debt. Yes, that's right, getting a debt consolidation loan can help you be more diligent about repayments, reduce your debts, and even decrease that sky-high interest rate.« Show Less
One of the best ways to determine whether your loan application is likely to be accepted is by checking your credit score. If you find that your credit score is too low, it's best to take some time to build your credit score before making a loan application. You can use websites such as Experian which is free to use to check your credit score. As well as reviewing your current financial standing, it will also allow you to rectify any inconsistencies.
You will undergo some of the traditional checks that come with loans - a credit check, an affordability check, an employment check, etc. Mostly, what the lender is setting out to find out is that you are not lying about your identity, that you can afford to repay the loan, and that you do not have a record of poor financial behaviours, such as defaulting on loans and CCJs.
If you struggle with a poor credit rating, you may want to consider secured loans as a means of consolidating debt.
How To Make The Most Out Of Your Debt Consolidation Loan Optimise Your Debt Consolidation Loan For The Best Results
Debt consolidation can be a real-life saver for some borrowers. Depending on how dire your situation is and how badly you need to reassess your debt situation, it may very well be your best solution. Therefore it's important to make the most of your loan, read on to find out how to make the most of your debt consolidation loan.
What Debts Can Be Consolidated?
Any debts that can be repayed early can be consolidated, including:
• Any loans (including payday loans)
• Credit card bills
• Debt collection agency debt
• Utility bills
• Bailiff debt
• Tax arrears
How To Get The Most From Your Debt Consolidation Loan
When looking for any financial product, you'll want to make sure that you're getting good value for money. Making the wrong decision can see you paying over the odds on monthly repayments, which could potentially worsen your financial position in the long-run. Follow these tips for a better debt consolidation loan.
In order to protect your credit score, you will need to carry out a 'soft search', such as the Eligibility Calculator from Money Saving Expert. This allows you to determine whether your loan application is likely to be accepted before completing a full application. Making too many loan applications within a short period of time can harm your credit score, which can reduce the chances of any future credit applications being accepted.
1. Find A Loan With A Low-interest Rate
If you're looking for a debt consolidation loan, it's likely that you have multiple high-interest debts that you want to get rid of. One of the first steps in using this method to get rid of debts quickly is finding a loan with the best rates. Don't worry; we'll show you to find the best debt consolidation rates later on in this guide. Once you've found yourself the best rate, you're ready for step two.
2. Use Your New Loan To Pay Off Existing Debts
Are your current rates poor? If so, once you've received your debt consolidation loan you can use this to pay off any high-interest debts. Read More »
This includes financial products such as credit cards, payday loans or any other high-interest loans that you're currently paying off. If your loan is large enough, you may be able to pay off all of your other debts, so that you only have to account for one monthly repayment rather than juggling multiple debt repayments.« Show Less
3. Ensure That You Keep Up With Your Monthly Repayments
It's important to remember that using a debt consolidation loan doesn't reduce the amount of money you owe. You'll have to keep up with your monthly repayments in order to improve your financial situation. If you've managed to obtain a debt consolidation loan with a reasonable rate, then you should be able to clear your debt more quickly if you stay on top of your payments and pay on time.
Do Debt Consolidation Loans Affect my Credit? How does Debt Consolidation Affect my Credit Score?
When looking for debt consolidation loans for bad credit uk, a popular search query is whether debt consolidation is bad for your credit. But the truth is that unsecured debt consolidation loans can be effective for those with good and bad credit, without damaging it in any way. Nevertheless, there is still a slight difference when applying for debt consolidation loans for poor credit. Find out here.
Applying for Debt Consolidation Loans for Poor Credit
If you don't have the most impressive credit history, then it may be more difficult receiving unsecured debt consolidation loans for poor credit. This is because the lender is likely to see you as more of a risk. Here at iThink Finance, however, understand that things don't always work out how you want them to, and so, we do our best to accomodate. Read More »
Because we are a broker, we work with a panel of the top UK lenders in the industry. This means that you have a higher chance of being accepted for a loan. So, apply now to receive an instant decision on your debt consolidation loan.« Show Less
Is Debt Consolidation Bad for your Credit?
Put simply, no. If you are taking out a debt consolidation loan to combine your multiple debts then it can actually improve your credit score.
Whilst lenders assess your creditworthiness when evaluating your application, it is not always determined by the credit ratings given by credit reference agencies. With this said, there are situations where debt consolidation is a better fix than in others. Read More »
For example, your credit rating is calculated by your credit utilisation, which is based on the amount of debt you own in comparison to the debt that is available to you. Therefore, if you reach the maximum of your debt, and then take out debt consolidation loans, the debt available to you increases, and your ratio should decrease, and in turn, improving your credit score. This is where debt consolidation can actually be beneficial to your credit. For this to be successful, however, you will need to leave the credit card accounts open even after your debts have been repaid.« Show Less
Can I Get A No Credit Check Debt Consolidation Loan?
No. FCA-approved Lenders are not able to offer you a loan without a credit check first. This is why it is important to steer clear of companies that promote this as they may just be trying to scam you. Read More »
If your credit history is not in the best shape, however, then you should make sure you don’t make too many credit applications as it could take a hit on your credit score.« Show Less
How to Protect your Credit
As mentioned, debt consolidation loans bad credit deals can be difficult to come by. This is why it is so important to protect your credit. There are several different factors that go into your credit score but it is primarily determined on how you manage your money. So, if you want to build, maintain, or improve your credit score, then there are a few things you can do:
1. Don’t Make Too Many Credit Applications at Once
When you make a new application, you have to endure a credit check. Therefore, every single credit application that you make affects your credit rating.
2. Pay Off any Debt that you Have
You should always aim to pay off any past debt as soon as possible. This is because lenders will see it as a good sign if you have less debt than the amount you want to borrow.
3. Check for any Errors on your Credit Report
There may be small, inaccurate errors noted on your credit report, and this something that you definitely don’t want affecting your your ability to receive debt consolidation bad credit loans. That’s why it is so important to regularly check your credit report for errors so you can avoid this.
4. Register on the Electoral Roll
Lenders will use the electoral register to verify your identity and your residence, so it is important to register on the electoral roll with your current address to make their job easier.
5. Pay your Bills on Time
If you do not repay your bills on time, then lenders may issue a default and close your account. You want to avoid this as it may cause negative repercussions on your credit rating for up to 6 years.
6. Set up Direct Debits When you Can
As mentioned previously, paying your bills on time and missing payments is never good for your credit score. Setting up direct debit payments is a good way to side-step this and manage your finances effectively.
Top Tips On How To Get The Best Debt Consolidation Loan How Do I Get The Best Deal?
There are so many different deals out there, that is can sometimes become overwhelming when deciding on just one. Well, we've done the hard work for you. Here is our top tips to score yourself the best deal!
Optimise Your Debt Consolidation Loan
In order to avoid any costly mishaps, you should opt for a debt consolidation loan with a low-interest rate and low monthly repayments. Read More »
However, how can you find the best prices? Not to worry, we're here to help! The following section will take a closer look at how to get yourself the best rates and the best ways to use your debt consolidation loan to utilise its benefits. Read on to find out how to stay on top of your finances and get one step closer to your dream of a debt-free future.« Show Less
Beware of the 'representative APR'. This is the advertised interest rate that you may get if you apply for the loan; however, you're not guaranteed to get this rate.
1. Work Out How Much You Are Paying In Interest
Before searching for a new loan, don't forget to work out how much you are spending on interest currently. Read More »
With this information, you can calculate how much money you could be saving by opting for a debt consolidation loan with a lower interest rate. If you have multiple debts from different lenders, you'll need to work out how much interest you're paying to each lender and add the values up to determine how much you're spending in interest per month.« Show Less
2. Make The Most Of Comparison Sites
It can be extremely time-consuming, draining and confusing visiting each individual lender’s website and manually comparing different offers. Comparison sites do all the hard work for you and allow you to see representative APRs side-by-side so that you can quickly find the best rate for you.
3. Check If It’s Cheaper To Borrow More
Generally, lenders tend to base their APRs on the amount that you want to acquire. In some cases, if you borrow more, you can obtain a lower APR than if you were to borrow a smaller amount of money. Read More »
You'll need to carry out some calculations to find out whether borrowing more will actually save you money. However, you may find that you only need to borrow a small amount more to obtain a lower APR, so it's well worth researching to see if this works for you.« Show Less
Frequently Asked Questions FAQS
Between payday loans and other forms of personal lending, it can become very difficult to manage loans and payments in so many different places. That is why debt consolidation is an excellent idea, but is a debt consolidation loan the best option? Review the information carefully and decide whether this type of loan is suitable or if you prefer a similar alternative.
What is APR?
In layman's terms, a representative rate is an overall snapshot of what lenders can expect to pay in interest. However, as different lenders will meet different levels of criteria, this can alter dramatically.
What information will I need when I apply?
In order to apply for a loan with iThinkFinance, you will need to have the following information to hand:
- Details of your income, along with any amounts you must pay in relation to rent or a mortgage.
- A home telephone number (must be a landline)
- Details of your residence over the last three years
- The name and address of your employer
Could I be eligible for a Debt Consolidatio Loan?
To ensure that you are eligible for a personal loan, applicants should meet the following criteria:
- You are over 21 years of age and in permanent employment.
- You can't be in receipt of any County Court Judgements or bankruptcy.
- You possess a bank or building society account in your name.
- That you are a UK resident and have been for the last three years
Can a personal loan work?
Debt consolidation loans are customarily secured against assets such as your house or car. This means that if you fail to keep up with your repayments, you'll lose the secured asset and the lender then has the right to sell your assets in order to cover the amount owed. If this sounds like a risky option, you may want to opt for a personal loan. Personal loans are unsecured; therefore, you eliminate the risk of losing your home or car if you can't keep up with repayments. However, it's important to note that personal loans typically have higher interest rates than secured loans, so you may end up paying more in the long run.
Is a Credit Card Better?
A loan is a significant and can often be a long-term commitment if you're looking for long term loans, so it may not suit every individual situation. Credit cards can offer a more flexible solution for your finance shortfalls. With a loan, you have to make regular monthly payments until the debt is cleared. If you're a freelancer, seasonal worker or in part-time employment, you may have irregular income patterns that make it more difficult to make these monthly payments. Alternatively, with a credit card, there is much more flexibility when it comes to credit cards. You'll have to pay the minimum payment each month; however, you can pay off more money each month and clear your debt without having to worry about early repayment fees.
How Much Can I Get With A Debt Consolidation Loan?
Since this loan is meant for debt consolidation purposes, it's likely you're going to get it in a more considerable amount. The maximum amount you can get depends on what kind of loan you go for, as well as your financial situation. If you opt for an unsecured loan, for example, you can expect a maximum of around £20,000. This hinges on an excellent credit score, however, a guarantor, an excellent projected income, etc. Not everyone will be able to get the full amount. The other option you have is to get a secured loan. A secured loan is a loan where you need to put an asset up as collateral. This effectively secures the loan, should you become unable to pay and end up defaulting. In that case, the lender can legally keep your asset in order to offset the loss incurred by your failing to repay the money you borrowed from them. This option will give you more flexibility regarding amounts, but the sum you can borrow will depend on the value of your asset, to the tune of £35,000, or perhaps even £50,000. The asset representing collateral must be of higher value than the total amount you borrowed.
Can Anyone Get A Debt Consolidation Loan?
There are no categories of individuals that are specifically excluded from this kind of lending, so there is no reason why you shouldn't be able to get a loan, as long as you meet the criteria. Yes, any financing solution will require you to meet some necessary requirements, and this is no different. You first need to check off some straightforward, fundamental criteria, like living in the UK and being a legal adult. Certain financial institutions may ask that you open an account with them for a specific minimum time, like 30 days. You will undergo some of the traditional checks that come with loans - a credit check, an affordability check, an employment check, etc. Mostly, what the lender is setting out to find out is that you are not lying about your identity, that you can afford to repay the loan, and that you do not have a record of poor financial behaviour, such as defaulting on loans, etc.
Will Debt Consolidation Loans Hurt My Credit?
I'm sure you're worried about your credit score - we all are. So you're probably wondering how a loan like this will affect your rating. Will it hurt it? Well, as long as you keep repaying every instalment on time, the answer is no, there is no reason why a debt consolidation loan will hurt your credit. In fact, repaying it consistently should do wonders for your credit rating and help it improve, as you are demonstrating good faith and an ability to repay your debt responsibly.