Finding it difficult to keep track of multiple credit repayments? You may be able to manage your debt better through debt consolidation.
Debt consolidation is one of the many debt refinancing solutions in the UK. It is ideal for people who wish to sort out their debt issues by simplifying their repayment schedule.
That means your debt will not vanish, but it will be all in one place. It also means that instead of going through the hassle of having to pay many creditors to meet multiple deadlines, you only have to make one monthly payment towards your new account.
One of the main reasons why debt consolidation loans are quite common in the UK is the ease of access. In the UK even people with bad credit can easily take out debt consolidation loans.
Taking out a personal loan for debt consolidation may help you tackle your debt head-on regardless of your credit score. But that doesn’t mean debt consolidation will help everyone in the UK clear their debt quickly.
Since debt consolidation involves taking out new credit, you need to consider your financial circumstances very carefully before deciding whether it will work for you.
We often get asked if we can get a debt consolidation loan with a poor credit rating in the UK. The brief answer is yes.
But there is also much to consider. The stakes are even higher for you if you are taking out a debt consolidation loan with bad credit.
That’s why we recommend that you discuss specifics with a debt expert before making up your mind. They can help you weigh out your options and decide whether a debt consolidation loan is indeed the best solution for you. If not, they will point you towards other alternatives.
Here, we have answered some of the most common questions about taking out debt consolidation loans for bad credit in the UK.
Can you get a debt consolidation loan with poor credit?
Yes, you can apply for debt consolidation loans with bad credit in the UK. It is one of the few debt refinancing options available regardless of credit score.
But it’s important to remember that as with any other loans, debt consolidation loans also rely on creditor discretion. This, by default, implies that if your rating is better, your case is more likely to be approved.
Your lender will likely sift through your credit files to assess whether you can easily repay your debt consolidation loan.
You may find that it’s easier to take out secured loans compared to personal loans. That’s because secured debt consolidation loans are based on a collateral asset (e-g your home) to cushion the lender against any risk.
You still may be able to get unsecured loans (e.g. short-term loans or personal loans) but those may be available on stricter terms and higher interest rates.
Key considerations
Debt consolidation loans work by streamlining your finances, but they are not the best solution for everybody. You need to assess your specific financial situation and then make up your mind – a debt consultant can help you do that.
But there are a few major issues anyone with bad credit should keep in mind while considering debt consolidation in the UK:
Will debt consolidation extend the overall duration of your loan?
Keep in mind that if consolidating your existing loans is likely to extend the overall duration of your loan, debt consolidation may not be the right option for you.
You may end up repaying more overall than you might have without consolidating your debt. Make sure you seek debt help from a consultant to figure this out beforehand.
Are you comfortable with putting your assets at risk for an unsecured loan?
This is relevant only in the case of unsecured loans. If you are pledging an asset as collateral against your new loan, you run the risk of losing your asset if the debt consolidation arrangement fails.
Types of bad credit debt consolidation loans
There are many types of bad credit debt consolidation loans available for borrowers in the UK. The sort of loan you borrow depends on two main factors:
Are you a homeowner?
How much would you need to borrow to cover your existing debt?
If you do not own an asset or are not comfortable putting it at risk, you will have to opt for an unsecured loan. However, if you own your house, you have the additional options of getting a secured loan or using the mortgage route.
That does not mean you can take this decision lightly – if anything, it means you should consider it more carefully because you run the risk of having your home repossessed.
The main types of debt consolidation loans for borrowers with bad credit in the UK include:
Short Term Loans
Short-term loans are usually taken out to cover a debt of £2000 or below. The overall duration of debt could be between 1-24 months. Short-term loans are unsecured loans so those without any assets can benefit from them.
Personal Loans
Unsecured personal loans for debt consolidation are quite common in the UK. They are taken out to cover debt between £1,000 to £25,000. The repayment duration could be as long as 10 years.
Guaranteed Debt Consolidation Loans
A guaranteed debt consolidation loan is a guarantor loan available for those with a clear preference for an unsecured loan. It allows people with bad credit ratings to obtain lower interest rates.
Secured Loans
If you own an asset, use a secured loan to get a lower interest rate. This is also an option for homeowners who plan on borrowing more in the future.
Mortgages & Re-mortgages
Mortgaging or re-mortgaging your house could help if you are a property owner looking for an alternative to secured loans.
Logbook Loans
A possible option for borrowers who don’t own property but have a car. Logbook loans are secured loans issued against collaterals such as cars and automobiles.
Money Advisor: Swift Debt Help & Relief
These are difficult times. The last few months have been financially challenging for most people. If you are struggling with debt and need help with it, we’re here for you.
Money Advisor is committed to helping people get out of debt and manage their finances in a better manner. If you or your loved ones need help with debt consolidation loans, reach out to us.
