At Employee Loans we believe in making things as easy as possible for our customers. All this jargon may sound very daunting, so we’re here to break it down for you and answer any questions that you may have.
On this page you will learn about what debt consolidation loans are, why they are helpful and sometimes not so helpful. This will hopefully help you come to a conclusion on whether this is the right path for you on your financial journey.
Debt Consolidation Loans Explained
Debt consolidation is getting out a new loan that will pay off all your existing loans. So, you can pay off separate loans that you have and struggle to keep up with and organise them into one loan.
For example, you may have car finance, TV finance and a house mortgage. This means that you will have three separate loans, with three separate lenders, resulting in three APR’s.
So, with a consolidation loan you can group all those loans together, by borrowing the full amount from another lender, such as Employee Loans.
You may be wondering how you can get a debt consolidation loan…
This is how it works: the lender will assess your credit file and financial situation, conclude if they are willing to take the risk and, if so, agree to lend you the money.
If you have a weak credit file and/or a large amount of debt, a lender may only offer you a loan on the condition that it is secured against a property, a vehicle or another asset you own.
This is called a secured loan, where your asset would be at risk of repossession if you fail to meet the repayments.
Positives of Debt Consolidation Loans
– You will have peace of mind of knowing that you are just paying one company and not forgetting about any payments that you owe to multiple lenders.
– You could end up having a lower interest rate, depending on your credit score.
– It can look better to potential lenders if you have one large loan, rather than multiple smaller loans.
– You will be in a better position to apply for more credit in the future.
– If you can pay off the loan, this will have a positive effect on your credit file.
Negatives of Debt Consolidation Loans
– By lowering your monthly payments with one loan, you are likely to have the debt for longer.
– Even though you are likely to get a lower interest rate on the consolidation loan, you will take longer to repay the full amount, which could ultimately result in you paying more for your loan.
– Some companies may add a fee for arranging this type of loan, so make sure it’s worth the cost.
If you need help arranging a consolidation loan or need some further advice, Employee Loans will be happy to help! Our trained advisors will be able to guide you through your credit enquiries and needs.
We’re here to guide you!
Monday to Friday (9am to 6pm).
Telephone: 01202 688177
UK residents only. Calls may be monitored or recorded.