Have you ever given much thought to debt consolidation? Are you struggling to keep on top of mounting bills? Perhaps you have credit card debt that feels like it’s suffocating you. Maybe your medical and utility bills are creeping up to a level that’s causing you anxiety. And perhaps you’re receiving pesky phone calls and letters of demand from your creditors. Unfortunately, it’s easier to become overindebted than you think, and if you’re crippled with debt and looking for a way out, debt consolidation loan could be the answer to your problems.
One thing you need to know is that you’re not alone – there are thousands of people in the UK suffering the same financial plight, and the reality is that you have the opportunity to take back control. It’s time to consolidate debt. The experts at Reform Debt Solutions are here to help you reduce stress and get your finances under control by directing you to the right debt management consultants and lenders.
This handy guide aims to familiarise you with the process of using a loan for debt consolidation, how they work and if they’re the right choice for you. You can also refer to the handy FAQ question to find the answers to a few burning questions you might have.
Debt consolidation is a service that’s readily available at Reform Debt Solutions – we act as brokers, putting you in touch with consultants and lenders who can assist you with your consolidation. The process streamlines your current bills into one effortless monthly payment with a loan. We can put you in touch with a solution that suits your needs regardless of your situation or credit rating. Consolidating your debt is an affordable option if you’re having trouble paying off all your obligations or would like to simplify your finances.
If you need help with debt consolidation loans, you will find our process simple. Funds are gathered through a secured or unsecured loan, remortgaging your property, or equity release. These funds are then used to clear your unsecured debts and bring some financial relief (or should we say breathing room) into your life. This process is not recommended to everyone. It’s only an option if the funds that can be raised will cover all of your outstanding debts with affordable monthly repayments. The entire purpose of the process is to ensure you are in a financially better situation.
At ReformDebtSolutions.co.uk, our goal is to help you improve your financial standing, and the first step we take is to put you in touch with brokers who can evaluate your current bills, credit cards, and other forms of credit. You will need to consider your amount owing, interest rate, and loan terms if any. The lenders and brokers on our panel will also look at your other lifestyle commitments, such as rent, mortgage, living expenses, and the like, to ensure that they have a definitive overview of your current financial situation. The process we introduce you to will capture and analyse all your debt before a course of action is offered.
A debt consolidation loan UK is not like a regular loan. It’s not designed to pay for a holiday, renovate your home, or get expensive equipment. It’s specifically designed to help you get out of the monthly stress and panic of trying to make ends meet. As such, great care has to be taken to review your situation and draw up a plan that works for you and your situation. And when the right consolidation strategy is in place, you can look forward to no more garnished wages and no more phone calls interrupting your family time.
There are two types of loans you can use for consolidation available for the over-indebted.
Unsecured debt consolidation loans bad credit do not require any type of collateral to receive the loan. In this case, your car or home is not used to obtain the loan. Typically, unsecured loans are more costly than secured loans because consolidation lenders are more likely to face risk. They have nothing to recover if a customer defaults on their loan. With this type of loan, you can expect to pay a higher interest rate and receive a smaller amount.
When applying for consolidation through Reform Debt Solutions, you will get a guaranteed rate when you apply for a quote, so before you sign up for a loan, you can decide whether it’s right for you.
In stark contrast to unsecured consolidation loans, secured loans are backed by personal assets or property. This may take the form of a second charge mortgage or lien on your property, home, car, or other assets.
Other than that, secured and unsecured debt consolidation loans operate the same.
When you apply for a debt consolidation loan, the cat is already out of the bag regarding your financial situation. This means that debt consolidation lender already knows that you’re not in the best financial place, and because of that, they may need a little more security for the loan than your signature and a promise to pay. Some lenders will require collateral in the form of your home, vehicle, or other high-value assets to secure the loan. If you don’t repay the loan, the asset will be seized to defray costs.
With a secured debt consolidation loan, you get a little more freedom! Yes, your loan is secured using your property, such as your home or car, but lenders take on less risk, allowing you to borrow more money to cover your outstanding debts.
If you’re considering debt consolidation, you’re more likely to be approved for a secured loan for debt consolidation. If you pay your loan back in full and on time, you will not have to worry about a lien on your property. If you’re responsible enough to tackle your debt once and for all, then you’re ready to take on a secured debt consolidation loan!
In a debt consolidation loan, some or all your existing debts are merged into one loan. First and foremost, all of your debts and accounts are listed and tallied up. When working with a debt consolidation advisor, they may even assist in contacting creditors to request reduced fees as you will soon settle the full outstanding amount. Once the creditors have responded, a new list of expenses is drawn up, showing the new figures owed. Then, you apply for a consolidation loan of the same value. All the creditors are then paid off in full, and you are left with one affordable monthly repayment to your consolidation lender.
You could save money on interest if you are currently paying for multiple loans and credit cards. In addition, a simple repayment schedule, fixed for the entire loan term, makes budgeting a lot easier.
At Reform Debt Solutions, we can provide you with access to a free personalised quote based on your unique circumstances and refer you to our regulated brokers for simple yet professional assistance. From the moment we pick up your consolidation case, we make it our duty to find you the best loan for debt consolidation. And if you’re worried about how requesting a quote will affect your credit score, don’t be – it has no impact at all.
The goal of debt consolidation is to simplify your finances into a single monthly payment that’s affordable to you. This may seem similar to several debt management options out there, but debt consolidation is probably one of the least severe approaches.
Is it right for you? You need to consider your situation and what your mounting debt is doing to you emotionally, physically, and mentally. If you don’t see a way out of your situation and if you owe money to several different lenders and accounts, debt consolidation can help you gain control of your finances once more.
One of the biggest benefits of consolidating debt is that the amount of money you pay out each month will be reduced. If you need the extra cash flow and are tired of suffocating under mounting debt, a debt consolidation loan may be what you need.
Debt consolidation can be a tricky thing to decide on. It’s not something you decide to do on a whim. Understanding how it works can help you decide if a debt consolidation loan is right for you.
Let’s consider a case study example.
Pam works as a front-of-house assistant at a local hotel and has worked her way into £4,000 debt over the years, which she is struggling to pay off each month.
Pam is on a limited salary and decides to apply for a debt consolidation loan and selects the 3-year repayment option. She is then offered a 17% per annum fixed interest rate and 23.48% service fee (also fixed per annum). So Pam’s monthly installments will be around £193. But this is only one example, and your situation (along with thousands of other people’s) may be very different from Pam’s.
|Owing||Interest||Cost||Years Left||New Cost||Monthly Reduction||Interest|
Understanding which of your debts you can and cannot pay off with a debt consolidation loan is important before you get the process started.
|Medical bills||Home loans|
|Unsecured personal loans||Home equity lines of credit|
|Store cards||Boat loans|
|Personal lines of credit|
While answering your questions, assessing your current lifestyle, analysing your financial situation, and offering you a quote all cost you nothing, you’re probably wondering what the financial impact of a debt consolidation loan will be. So, what does debt consolidation cost in the UK? This all depends on who assists you with your debt consolidation. Some companies charge an arrangement or service fee to set the loan in place for you, which is fine if they are providing you with advice and guidance. Others simply charge you for the loan along with an annual percentage rate (APR) and an annual percentage rate of charge (APRC). The APR refers to the interest you will be charged alone, whereas the APRC fee includes extra costs, such as the arrangement/setup fee.
Of course, how much you end up paying each month will depend on how much you need to loan to cover your costs, the interest rate offered, and how long the term of the agreement is.
At Reform Debt Solutions, we receive requests for help with consolidating debt daily. If we review your case and believe debt consolidation is the most viable option for you, you will be referred to our regulated broker, who will activate the next step for you. Should you be approved for a debt consolidation loan, our company may be paid a commission in the event of a successful referral. But don’t worry – that won’t cost you anything – nothing comes out of your pocket!
|Reduced monthly costs||The overall amount of debt could end up higher|
|Easy-to-manage payments||Can impact your credit score|
|You choose the length of your loan||The debt period may be extended|
|Quick and easy approvals|
|Ends all creditor calls to your home|
|Garnished wages are stopped|
|Just one debt payment per month|
|Process professional handled for you|
Debt consolidation is not one size fits all. Therefore, our trusted debt consolidation lenders will take your personal circumstances into account when considering your application. This is especially important for self-employed people and people with nonstandard addresses.
Nevertheless, you must meet some basic requirements:
With bankruptcy you may harm your credit score for at least 6 years, however, debt consolidation can cause a temporary dip in your credit score but can improve your rating over time. There are a few major reasons for this:
But over time, debt consolidation loans may help to improve your credit score. That’s because having one monthly repayment can make it easier for you to pay on time, every time.
Receiving a quote for a debt consolidation loan from Reform Debt Solution’s regulated brokers won’t affect your credit score as the record, known as a ‘soft search,’ isn’t visible to anybody but you. Only if you apply for the loan will your credit score be impacted.
Taking out a debt consolidation loan could save you money in interest and make payments easier to manage. Your financial circumstances will determine if a debt consolidation loan is right for you. If your current situation is leaving you feeling stressed and worried about how to manage it, debt consolidation might be a step in the right direction.
When we refer you to our regulated broker, you can choose a loan term that works for your situation. You’ll be given a clear, guaranteed rate upfront so you can make an informed decision. On top of that peace of mind, we are happy to take your call and answer any questions you may have.
It’s important to be mindful that if you do choose a personal loan to consolidate your debts, it is possible that you could end paying more in interest, so please read the terms and conditions carefully and allow our brokers the opportunity of advising you.
Debt consolidation loans aren’t available to anyone and everyone. There are still eligibility factors that come into play. In most instances, a denied application comes down to three possibilities:
Take a second to think of your household’s monthly expenses. Off the top of your head, you can probably reel off a fairly long list: credit cards, your car, your mortgage, utility bills, the list goes on.
It’s important to bear in mind that not all debts can be consolidated. With the two types of debt, unsecured and secured, you can only consolidate certain debts.
With debt consolidation, you can cover the following debts:
You cannot consolidate the following debts when consolidating:
It’s essential to consider these expenses when consolidating your debts. When you inquire about a debt consolidation loan with Reform Debt Solutions, lenders on our panel can advise you further on what debts can and cannot be covered.
Getting loans to consolidate debt requires you to apply and meet our lenders’ requirements, just as getting any type of credit does. The lender will look at your credit report, application form, amounts owing to various creditors, and your current situation before advising you on eligibility.
If your credit score is low, you may have a hard time getting a good deal – or even approval. If you want to improve your score, there are several steps you can take. Your first priority should be to consider checking your credit score. You should also apply for your debt assistance with lenders or debt management service providers who won’t do a hard check on your credit score during the pre-approval process.
Debt consolidation is similar to regular borrowing, except there are stricter terms in place along with an eligibility process that’s finely tuned to approve only people who need financial assistance and can afford to pay for it over the long term. Here’s what you need to know about consolidating your debt.
Even if you get a lower rate on your new personal loan for debt consolidation than your existing credit accounts, a longer repayment period may lead to a higher amount of money you’ll pay overall. When offered a loan, be sure to read the agreement carefully prior to signing. Even if this is the result of your agreement, it may be better for you, in the long run, to ease the burden now. This is something you will need to decide!
Setting up loan consolidations may require you to pay a percentage of the amount you’re borrowing. Be sure to ask about this fee. Many lenders take it right off the top. For example, if your loan is for £10,000, a lender might pay out £9,600, taking a £400 establishment fee right off the top. It’s worth discussing these fees with the debt consolidation consultant before coming to a final arrangement.
Applying for a loan and closing old accounts instantly can negatively affect your credit score. Though this is a setback, it is also a temporary one. In order to get ahead, starting a debt consolidation loan may lower your credit score initially, but when your debts are paid off, you can focus on rebuilding your credit. Taking the big picture into account is important.
A consolidation loan may still be available even if you have a low credit score. Loans secured by collateral are typically easier to get than personal loans because they reduce the lender’s risk by securing the loan with an asset, like your house, car, or other valuable assets. However, it is important to keep in mind that you may lose the asset if you do not repay the loan. Therefore, secured loans should be taken seriously.
Debt consolidation will have an impact on your finances. Before getting a debt consolidation loan, consider these factors:
As we have outlined, fees and interest rates need to be considered while reviewing agreements.
Suppose you’re in a situation where you are juggling multiple creditors inefficiently. In that case, a higher interest rate may be worth it, especially if it helps you get your credit back on track.
This may be so, but a debt consolidation loan can benefit you by easing your monthly financial burden now.
There are several benefits to consolidating your debts through a loan:
As opposed to juggling multiple loan account, credit cards, and store accounts, you’ll make one monthly payment on the same day every month. This works out much easier than trying to remember what is due and when and having to fend off several angry creditors when you’re late or run into financial troubles.
If all your debt is in one place with a personal debt consolidation loan, you can easily see how much you owe, how quickly you’re paying it off, and how much interest you’re paying. In most instances, being able to track your debt management progress so simply can inspire and motivate you to keep paying down your debt!
By consolidating your debts under one loan with a lower interest rate, you may be able to reduce your interest payments to a manageable level that will allow you to get ahead instead of always playing catch up with your finances.
Sure! Here are some other options to consider:
Your credit cards may be a good place to transfer debt if you wish to consolidate it. Paying no interest during the promotional period will simplify your payments as well as reduce credit card debt, but if it’s a hefty debt amount, this could prove useless.
Here are a few things to keep in mind:
You can also send a letter directly to your lenders explaining that you’re struggling to pay them and asking for their assistance. This is often the first step people consider. It’s best to do this as soon as possible rather than wait until you miss a payment or default on your account. While some lenders and creditors will be willing to work with you to come to the best possible repayment arrangement, others will need the careful persuasion of a professional.
A company may be willing to accept a reduced payment or waive penalty fees if it finds it difficult to recover money from a defaulting client. If you reduce your payments, your credit report will mark it and will likely result in a lower credit score. Plus, it’ll take you longer to pay off your debt.
Companies that promise to wipe out your debt may approach you if you have trouble making your payments. Make sure you are cautious. Fees can add up, and you could wind up with more debt and/or damage to your credit.
Depending on how you consolidate your debt, it can affect your credit score differently. You may see a positive impact on your score for the following reasons:
The following reasons may negatively affect your score: