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If you’re aiming to combine all your debts into one single loan through a debt consolidation despite your bad credit, know that you’ll have options out there, limited they may be. Bad credit debt consolidation is often available through online lenders and credit unions. What sets these loans apart from the standard debt consolidation loan is that the fees may be significantly high. So, it is important to shop around first in order to get very reasonable terms.
What is a Debt Consolidation Loan
Getting a debt consolidated is often a smart way of managing your debt. There is potential to save on interest. You can get the debt paid down faster potentially. To get this loan, you’ll borrow enough to pay off all of your existing debts so moving forward, you’ll only have to make a single monthly payment.
Options for bad credit borrowers
You can check what online lenders are offering in terms of bad credit debt consolidation. They offer a quick and easy application process and there would be no need for you to have to go through the usual rigorous paperwork. You won’t even need to go to their branch to apply. Once approved, you get the funds within a week or even within the day for some.
While it is expected that your interest fees will be high, it should be reasonably high. So, watch out for lenders that charge way too high APRs as this will potentially cause you to get into even more debt you can’t repay.
When you have a number of debts under your name, keeping track of every repayment that probably falls on different dates every month can be exhausting. Debt consolidation will be a good option for situations like these. It allows you to combine all your debts together into a single loan so you only have to deal with a single repayment every month.
It is important to understand that consolidating your debt does not reduce it. T does lift your burden in some way because it helps you manage your debt more effectively. You do not have to deal with several repayments every month, which could be hard to track. When you consolidate your debt, you’ll only have to process a single repayment monthly.
How Beneficial is Debt Consolidation
One of the benefits that you can expect from consolidating your debt is reducing your monthly debt payments. Since you can spread out the debt term, you can get your money repayments reduced into figures that will be easier for you to manage and afford. It is also one way of reducing the number of repayments you have to make. It can be hard to keep track of your debts when you have too many due dates and payment amounts to make.
A debt consolidation can help improve your credit score. If you can get the loan paid off without getting into a new debt, expect that there is going to be a positive impact on your score. Remember that you are technically taking out a new loan to pay off all of your existing ones. So, it is essential that you manage this new loan right in order to make the most positive impact on your credit score.
Debt consolidation can help reduce the interest that you are charged with. This is especially true if your debts have really high interest charges attached to them. Consolidating these high-interest loans would generally mean paying back less interest through a debt consolidation loan.
How to Consolidate Your Loans
A lender will first check your eligibility for a debt consolidation loan by assessing your outstanding debts and how risky a borrower you are. If you have had records of large debts or bad credit on your record, lenders may only grant the debt consolidation loan if it is secured by an asset. This often means using a property to secure the loan just so risk on the part of the lender gets reduced. For cases like these, you have to see to it that you can cope with the payments. Otherwise, you are in real danger of losing your property.
It is possible to use personal loans when consolidating debts. To assess your eligibility, the lender will consider how much you are borrowing, the term of the loan, and your credit history. Often, if you have a good credit rating and you have a low outstanding debt, then getting a debt consolidation loan should be easy.