Are you feeling overwhelmed by juggling multiple debts? Have you ever wondered if there’s an easier way to manage all those payments? If this sounds like you, debt consolidation companies might be the solution you’re looking for.
But what exactly do they do, and how can they help you get your finances back on track? Let’s break it down and explore everything you need to know about debt consolidation companies.
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Debt Consolidation Companies: An Introduction
Source: MoneySavingExpert
Debt consolidation companies offer loans to pay off multiple streams of debt and combine them into one loan with a fixed monthly payment. This reduces the stress of juggling multiple debts, provides affordable monthly payments and lowers interest rates.
You need to fulfil some eligibility criteria to get a loan from debt consolidation companies. The eligibility requirements vary between companies, but usually, they review your financial situation, including your credit score, and payment history.
Remember debt consolidation loans don’t eliminate your debts. You still have to pay all your debts, but they are streamlined to an affordable, single monthly payment. This helps you to pay the loan on time, consistently increasing your credit score and you don’t have to deal with multiple deadlines and interest rates.
Additionally, debt consolidation companies will discuss with your creditor and negotiate secure and better terms for you.
If you want additional guidance to become debt-free, get in touch with us.
Are you struggling with unaffordable debt?
- Affordable repayments
- Reduce Pressure from people you owe
- One simple monthly payment
What are some top debt consolidation loans and what are their eligibility criteria? Let’s discuss this in detail. Keep reading.
Popular Debt Consolidation Companies
Below are some of the most popular debt consolidation companies in the UK.
Freedom Finance offers secured and unsecured loans with an APR of as low as 3.4% and quick, tailored quotations. You’ll be informed about your eligibility for the loan within minutes of applying.
Hence, this company is the perfect choice if you’re looking for rapid service and competitive rates. Additionally, it’s suitable for various financial situations.
- Fast processing time.
- Prompt customer service.
- Low APR on secured and unsecured loans.
TSB offers consolidation loans ranging from £1,000 to £25,000 which can be repaid within 1 to 5 years. The APR depends on your specific quote and it can go to a maximum of 39.9%.
When you enter the debt amount and the repayment terms, you’ll get a personalised quotation within minutes. The best part is, that getting this quotation will not affect your credit score.
TSB’s offers are designed for various financial needs. For example, you can skip payments for up to three months under certain conditions. The online calculator and the flexible payment options make it easy for borrowers to manage debt effectively.
- You can get a personalised quote within minutes.
- Offer flexible payment options.
Monevo is an award-winning company which offers personal loans up to £50,000 with a repayment period over five years. They provide excellent customer service and comprehensive debt management tools to help you manage debts effectively.
If you have a large amount of debt to pay, Monevo is ideal for you as it offers you large sums and a longer repayment period.
- Allow you to borrow large sums of money.
- Reliable customer service.
- Provide long repayment periods.
Aspire Money is a credit brokerage that helps you find the best loan options with minimal commission fees. They have a wide array of loan products from different lenders and you can choose the best option.
You have a high chance of finding the perfect fit for your debt this way. Additionally, Aspire Money offers you technical assistance to secure loans and competitive terms and conditions tailored to your needs.
- You get the opportunity to choose the best fit from a wide variety of options.
- Support to secure loans under conditions tailored to your needs.
Keep in mind that some debt consolidation companies use the phrase ‘government debt consolidation loans’ to make you think that they are backed by the government. Ensure you don’t fall for this trick.
Now you may wonder, what’s the ideal debt consolidation company for me? Read the next section to find out.
Factors To Consider When Selecting The Right Debt Consolidation Company
You must look for the below key factors to choose the perfect debt consolidation company for your debts.
- Interest rate
Different companies offer different interest rates and it can impact your total repayment amount. For example, if you select a company with a high interest rate, you’ll have to pay much more than your debts.
Hence, compare the interest rates offered by different companies and choose the best option based on your financial situation and credit score. Remember securing a loan with a low interest rate can save you a substantial amount of money.
- Costs and fees
Debt consolidation loans come with upfront costs, application fees, and other expenses. These expenses vary from company to company. Research the total cost required and if there are any hidden fees.
Choose the company with lower costs and better terms, this is important if you’re on a tight budget.
- Loan amount and payback period
Different companies offer varying loan amounts and payback periods. You must select a company that offers an affordable payment plan with the best terms.
Sometimes a longer repayment period with low monthly payments can result in more interest over time. You must analyse this thoroughly.
- Services Offered
Some companies provide additional services, such as debt management plans and financial advice. These support services can help you manage your finances more effectively and avoid falling into debt again.
If you’re unsure of which company to choose, get advice from a professional debt advisor or a debt charity. Below are some debt charities in the UK where you can get debt guidance for free.
- StepChange.
- National Debtline.
- Citizens Advice.
Pros And Cons Of A Debt Consolidation Loan
You must consider the pros and cons of the debt consolidation loan before opting for one.
- Reduced monthly payments.
- Managing one payment is more straightforward than managing multiple debts.
- Lower interest rates.
- Boost your credit score with time as it’s easier to make one monthly payment at a time.
- If you miss the monthly repayments, your credit score will be affected negatively.
- You may end up losing your home, vehicle, or other assets if you obtain a secured debt consolidation loan.
- You’ll have to pay extra upfront fees and other costs.
If you think a debt consolidation loan is not suitable, you can consider other debt solutions below:
- Individual Voluntary Arrangement (IVA): IVA is an agreement with your creditor to pay all or part of your debt. Here you make regular payments to an insolvency practitioner who’ll divide the payment among your creditors.
- Debt Management Plan (DMP): DMP is an agreement with your creditor to pay all your debts where you agree to make small amounts of regular monthly payments or repayment after few months.
- Debt Relief Orders (DRO): DRO is a debt solution where you stop debt payments for 12 months and after 12 months your debt is more likely to be forgiven.
Each of the above debt solutions have their pros and cons. So, the ideal solution depends on your loan amount, credit score, and financial situation. Consult a debt advisor if you’re unsure which debt solution to choose.
Is Credit Score Important?
Companies will assess your credit history to determine your loan repayment ability. Hence, your credit score plays an important role in securing a debt consolidation loan.
A higher credit score can help you secure better rates and terms, while a lower score may limit your options. However, many online lenders offer debt consolidation loans with bad credit, but they come with high interest rates.
Improving your credit score before applying for a consolidation loan can increase your chances of approval and reduce your interest rates. Below are some ways to increase your credit score:
- Pay the existing debts on time.
- Avoid getting any additional debts.
- Check your credit report and resolve if there are any disputes.
Final Thoughts
Debt consolidation companies offer debt consolidation loans to streamline multiple debts into one fixed monthly instalment. You have to fulfil certain eligibility criteria to secure a debt consolidation loan.
It reduces the stress of handling multiple debts, provides one affordable monthly payment, and reduces interest rates. Freedom Finance, TSB, Monevo, and Aspire Money are some top debt consolidation companies in the UK.
Consider the interest rate, upfront costs and additional fees, loan amount and repayment methods, and the extra services offered when choosing a debt consolidation company. If you are unsure of how to get free from your debt fill out this online form and one of our debt advisors will contact you for guidance.
Key Points
- Debt consolidation companies provide loans to combine multiple debts into one manageable payment and these loans often come with lower interest rates and simplified payment plans.
- The Debt Consolidation companies assess your credit score, payment history, and financial health before offering you a debt.
- A higher credit score will make you eligible for better rates and terms.
- Some of the most popular debt consolidation companies include:
- TSB:
Offers loans from £1,000 to £25,000.Features an online debt calculator and flexible repayment options. Allows up to three months of skipped payments under certain conditions. - Freedom Finance:
Offers both secured and unsecured loans with APRs as low as 3.4%.Provides quick, tailored quotations and fast approval decisions. - Monevo:
Loans up to £50,000 with repayment periods over five years.Known for excellent customer service and comprehensive debt management tools. - Aspire Money:
Acts as a credit brokerage to find the best loan options with minimal fees.Offers technical assistance to secure competitive rates and terms. - Consider the interest rate, costs and fees, payback period, and the services offered to choose the ideal debt consolidation company.
FAQs
Yes, debt consolidation companies streamline all your debts into one single, affordable monthly payment. This helps you to pay your debts on time, reduce stress, improve your credit score, and help you to get out of debt over time.
Consider the loan amounts, repayment options, interest rates, additional fees, customer service, and the extra services offered when choosing an ideal debt consolidation company.
It may take a few to several weeks to get a debt consolidation loan approved depending on the company and your eligibility criteria such as income, credit score, financial situation, etc.
Personal loans are for personal expenses, while debt consolidation loans are specifically for managing and refinancing existing debts. Consider your financial goals and consult with a financial advisor to determine which option is best for you.
Most personal loans require a minimum score of 585. Hence, it might be challenging to get a personal loan with a credit score of 550, but not impossible. However, lenders may impose high interest rates and strict repayment terms to offer you a loan with a low credit score.
Debt consolidation will remain on your credit report as long as the loan is open. If you make the payments consistently, you’ll be able to improve your credit score and get easily approved for other loans. If not, your credit report will be affected negatively.
