Making Your Loans More Affordable Using Debt Consolidation

With the rise in popularity of personal loans, more and more individuals have started borrowing money from banks in order to pay for products and services that they may not be able to afford otherwise. Although most lenders offer flexible loans that have low-interest rates, …

With the rise in popularity of personal loans, more and more individuals have started borrowing money from banks in order to pay for products and services that they may not be able to afford otherwise. Although most lenders offer flexible loans that have low-interest rates, which should be relatively easy to manage, taking out multiple ones at the same time can make your debt very expensive. This issue is especially difficult to handle in the case of variable-rate loans.

Regardless of the reason that pushes an individual to take out multiple loans, it is important to keep in mind that there are ways to reduce the cost of the debt. As a solution, most people choose to refinance their loans. However, debt consolidation is usually more affordable and easier to access. Here is what you know about debt consolidation loans and how they can help you reduce the cost of your active loans:

What Is a Debt Consolidation Loan and When Is It Useful?

Debt consolidation loans are designed to help you transform several different types of debt into a single expenditure. For example, if you have a credit card that you have maxed out, a £10,000 personal loan that you are currently repaying, and other types of personal debt, you can consolidate all of it using a single loan.

Debt consolidation loans enable you to merge multiple types of debt, each with different terms and conditions, into a single one that usually has a lower interest rate and spans over a greater period of time. Most lenders offer these, and they usually have fixed interest rates, making them easy to repay.

There are many different types of debt. Some good, some bad.

What Are the Advantages of Debt Consolidation Loans?

Debt consolidation loans are the best way to minimise the cost of your existing debt. However, this is only one of their advantages.

  • One single payment – If you have 4-5 types of debt that you have to pay, you will have to make 4-5 monthly payments. This means that you will have to make multiple transactions on different days, which can make it difficult to keep track of things. With a debt consolidation loan, you only have to make a single payment per month;
  • Lower interest rates – Debt consolidation loans are great ways to get rid of variable-rate loans that may have become too expensive to handle. They have fixed interest rates that are relatively small when compared to other types of debt;
  • Great for secured loans that put your property at risk – If you are close to finishing the repayment of a secured loan but are running out of money, you can use a debt consolidation loan to make the final payments and only focus on repaying this single debt in the future;

The Risks and Disadvantages of Debt Consolidation Loans

As useful as these loans are for individuals who find themselves swarmed with monthly repayment instalments, they can be difficult to obtain, especially if you have a poor credit rating. Although most lenders offer them, the fact that they involve very large amounts of money makes the loans have strict requirements. These differ from one lender to another, but in most cases, you will have to have a good credit rating or offer a high-value property as collateral.

This brings us to the main disadvantage of debt consolidation loans. They are always secured, which means that if you are ever unable to make the payments for them, the lender will be able to take possession of the property that you’ve offered as collateral.

Overview

Debt consolidation loans are great tools if you have multiple loans that you’ve got to pay and cannot keep track of them. They are also effective at lowering the cost of your debt and giving you more wiggle room if any of them are approaching their term and you are unable to repay them on time.  However, a debt consolidation loan is a long-term commitment. Give it a lot of thought before applying to one.

Top Reasons Why Some People Prefer Doorstep Loan

A doorstep loan is an old-fashioned way of lending and borrowing money. It is ideal for people that have a low credit score, do not have a bank account or those that prefer face-to-face borrowing. You can apply for this loan online, but the release …

A doorstep loan is an old-fashioned way of lending and borrowing money. It is ideal for people that have a low credit score, do not have a bank account or those that prefer face-to-face borrowing. You can apply for this loan online, but the release of funds and collection is always face-to-face.  A team of collectors would come to your house to hand you the funds and to collect payments regularly, usually weekly. One can borrow £100 to £2500, and you can pay this for 14 to 52 weeks. Despite the face-to-face transaction, approval of the loan and release of funds is quick and easy. Here are some reasons why some people prefer to take doorstep loans.

You Do Not Need Good Credit

A doorstep loan is one alternative for people with bad credit or no credit at all to borrow money for their urgent needs. Many people cannot take a loan because they cannot meet the credit rating requirements of many traditional lenders. With a doorstep loan, people with bad credit can apply for a loan and qualify quickly and easily. A credit agent comes to discuss the terms and conditions of the mortgage at the borrower’s home. If the borrower is amenable to the terms and conditions, the agent releases the funds on the spot.

You Do Not Need a Bank Account

Most online lenders release funds and collect payments through the bank account of borrowers. However, nearly two million UK residents do not have a bank account, and these people would find taking a loan from online loan companies almost impossible.  With a doorstep loan, it does not matter if you do not have a bank account because the lender delivers the cash to your home and a collecting agent visits regularly during your payment schedule. If you do not have a bank account, do not think that you could never apply for a loan anymore. Several doorstep lenders welcome applicants and approve most applications.

Convenient

A doorstep loan is ideal for people that cannot quickly leave their home for some reasons as well as to those living far from banking facilities. Borrowers can receive their funds at home and make their payments at home. Borrowers would be reluctant not to pay when the collector visits them.

Predictable

Most doorstep lenders create a ledger where they record the payments. Borrowers would be able to track their loans without using the internet to check their loan balances. Because borrowers also have a ledger showing how much to pay during the visits, they would be able to program their expenses so that they can set aside the amount that they need to repay the loan.

You Get Reasonable Interest Rates

Another feature of a doorstep loan is the reasonable interest rates. While some people compare doorstep lenders to loan sharks, there is a big difference between the two. Doorstep lenders are legitimate because the Office of Fair Trading regulates how doorstep lending companies conduct business such as interest rates and penalties. These companies cannot implement an annual percentage rate that is beyond what the Office of Fair Trade recommends. On the contrary, loan sharks are illegal because no agency oversees their activities. Aside from exorbitant interest rates, loan sharks would mete out physical punishment, making this type of loan quite dangerous.

For people who have limited options when it comes to taking a loan, a doorstep loan is a good alternative. Aside from being registered with the Office of the Fair Trade, it comes with a reasonable interest rate. If you have a bad credit record or have no bank account, doorstep lenders could still help you find solutions for your emergency needs.

Essential Checklist to Go Through Before Applying for Any Type of Loan

As more and more lenders start offering accessible loans, individuals get increasingly comfortable with applying for them. Unfortunately, this has led to many cases in which people have disregarded the risks that are inherent to most loans and have ended up in situations where they …

As more and more lenders start offering accessible loans, individuals get increasingly comfortable with applying for them. Unfortunately, this has led to many cases in which people have disregarded the risks that are inherent to most loans and have ended up in situations where they are unable to repay the money that they’ve borrowed. Even unsecured personal loans can have a severe impact on your credit rating if you do not repay it on time.

This having been said, part of the issue is caused by lenders who create increasingly complex terms and conditions, up to the point where the average individual may not understand all of the fees, charges and clauses that he agrees to. In order to combat this problem, we have created a 5-item checklist that will help you make an informed decision.

Loans may be secured or unsecured.
  1. Have You Chosen the Right Type of Loan for the Situation?

Most banks offer a very large number of types of loans, each of which has different advantages and disadvantages. Assess your situation and your need and then look at all the loans that you can apply for. The best place to start is by analysing your monthly expenses in order to figure out how much you could repay every month.

Pay special attention to secured loans as these require collateral. The reason why you should give them extra though is that they have tangible consequences. Not repaying them on time can lead to the lender taking possession of your property.

  • Use an Online Calculator or One Provided by the Lender to Calculate the Repayments

Look for an online calculator on the lender’s website that you can use to calculate your monthly repayments. Keep in mind that you will usually only get an approximate result if you apply for a variable-interest loan. This is due to the fact that the interest attached to these depends on changes in the economy.

  • Is the Loan Secured? Are You Prepared for the Risk?

Check to see if the loan that you’re interested in is secured or unsecured. Unsecured ones usually have better interest rates but tend to be smaller in value. On the other hand, if you need large amounts of money, you may want to go for a secured loan. However, the lender will require collateral that is usually in the form of your home, your car, or another property.

Keep in mind that if you cannot repay a secured loan, the lender will have the right to take possession of your property, which can lead to you losing your home.

  • What Is the Term for the Loan? How Much Stress Will It Put on Your Finances?

Check the agreement in order to determine the precise duration of the loan and make sure that you will be able to repay it in due time. Keep in mind that if you are applying for a loan that has a variable interest rate, there is a chance that you will have to make monthly payments that are larger than what you estimate at the beginning. This may put a lot of stress on your finances.

As a warning, remember that you may be able to change the term of the loan; however, this will also bring a modification of the interest rate.

  • What Are the Exact Fees and Charges That You Have to Pay?

Most lenders advertise their loans by emphasising their APR or annual percentage rate. However, this is not always a clear indicator of what your final interest rate will be. The actual interest rate is usually determined by your financial history, various personal circumstances that may come into play, the amount of money involved, and the length of the loan.

On top of this, you may also have to pay various arrangement fees, early repayment fees if you want to repay the loan before its term, refinancing fees, and others. Look for these in the agreement and make sure that they are affordable enough to give you enough flexibility to refinance or repay your loan if the need arises.

Are You Ready for a Loan?

Look at what type of loan you need and at how much money you can afford to spend on the loan. Go through our checklist and always make sure that you only borrow what you can repay. In the long run, it may be more affordable to get multiple fixed-interest loans that have a shorter term than to get a variable interest one that spans over a decade or more.

Two Ways to Avoid Hurting Your Good Credit Standing

Some people have the luck of having a good credit score so that they can apply for a loan in banks and financial institutions without fearing rejection. However, your credit score does not remain the same for years. There is a big chance that your …

Some people have the luck of having a good credit score so that they can apply for a loan in banks and financial institutions without fearing rejection. However, your credit score does not remain the same for years.

There is a big chance that your credit rating would go down if you are not careful with your borrowing and spending habits. Once your credit score goes down, you would find yourself getting rejections from lending companies that used to welcome your loan application with open arms. You have no choice but to start from the bottom again and rebuild your credit history. However, you can avoid this from happening in some ways. Here are two ways to avoid hurting your good credit rating.

Know When a Loan Is Necessary

Nowadays, taking a loan has become as easy as spending your money. You can apply for a loan through the internet. The moment you send your application, a lending company reads it and makes instant decision to approve it. After a few hours, you can see the funds on your bank account and withdraw it anytime you want. The sad thing is you tend to spend the money you got faster than how you got it. But, are these reasons enough to get a loan that you must pay for several months?

You must only take a loan for the time when you have an emergency that requires an amount that you do not have or instantly raise. A severe accident or illness involving a family member could mean high expenses that your salary and savings cannot cover. The need is urgent in a life and death situation. Finding someone to lend you a few thousand dollars could be a challenge. Your only option is to apply for a loan and the position where you are in justifies the action. At this point, a loan is of utmost necessity.

Putting Limits to Your Expenses

If you think about all the things that you want to buy, your list would be very long and you would be adding on it every minute of your life. Wanting to own something does not mean you have to buy what you want. You can still use your old one while saving for a new one. Buying new clothes when you have plenty is impractical. Taking a loan to get things that you already have is a total waste of money and is not a good reason to borrow money.

The fact that many lending companies ask how you plan to spend your loan proceeds indicates that you must not take a loan for unnecessary expenses. 

Paying for your loan is like working on a project. In the first few months, everything goes smoothly, and you are confident of finishing the project before the deadline. However, the few last months of paying your loan could be as tricky as finishing your project. Sometimes you find it now challenging to get the cash for your loan payments. You have already depleted all your resources. The last two months of paying your loan seem to be several years.

At the last two months before becoming debt-free, you gave up and thought neglecting the final payment won’t hurt you or the lender. However, the omission would stay in your credit record, and this information can damage your credit record. You would find it challenging to take significant loans from banks and other lending institutions.

Taking a loan for your wants, and spending like your source of cash would never dry up could surely ruin your credit record.

3 Easy Steps That Will Help You Get a Loan

Banks and other lenders are usually extremely competitive when it comes to the terms and conditions of the loans that they offer. However, deciding whether an individual is eligible or not for a particular type of service is another matter. Depending on your current financial …

Banks and other lenders are usually extremely competitive when it comes to the terms and conditions of the loans that they offer. However, deciding whether an individual is eligible or not for a particular type of service is another matter. Depending on your current financial status and your relationship with the lender, getting a loan, of any type, can be extremely difficult.

This having been said, there are ways through which even those with a poor credit rating can increase their chances of having their loan request approved. While this will not guarantee that you get the best possible terms and conditions, it will ensure that you can always borrow money from a bank in case of an emergency. Before beginning, it is important to mention the fact that lenders usually look at your long-term financial record. This means that you will have to constantly avoid decisions that may make you appear to be untrustworthy.

Here is what you need to know:

  1. Constantly Work Towards Building up Your Credit Rating

Your credit rating is comprised of several items, most important of which are how accurate you are when it comes to repaying the money that you’ve borrowed in the past. As a result, you need first to make sure that you avoid situations that could irreparably damage your credit rating. These include cases in which you are late with your monthly payments, consistently.

The fastest way to improve your credit rating is by getting rid of as much bad debt as possible. In other words, you need to pay off your credit cards and to try to repay your smaller loans. Furthermore, try to use your credit cards as little as possible. Lenders usually consider that individuals who use their credit cards on a daily or weekly basis are unable to manage their personal finances and cannot be trusted with a loan.

  • Double-check Your Loan Application

All the information that you submit through your loan application will be checked. This means that it is extremely important to make sure that it does not contain any mistakes. Even an error that may appear harmless, such as a misspelt first name or address (or a wrong address number) can lead to a refusal. Make sure that you double-check your application and always ask the lender for help if you are unsure of how to fill out the forms.

  • Avoid Submitting a Large Number of Applications

Lenders can see how many applications you’ve submitted. If you submit a large number of loan applications, they will get the impression that you are unable to manage your personal finances, and this may lead to harsher terms and conditions. The main reason why people tend to submit a large number of applications in a short amount of time is that they are interested in how large the monthly payments would be. If this is your case, try using an online estimate calculator to get the information that you need.

Plan Everything in Advance and Take Precautions

Overall, if you take our tips into consideration, you will increase your chances of getting a loan. Furthermore, keep in mind that your personal financial record contains information that spans your entire adult life. In other words, always take precautions when it comes to loans. Banks and other private lenders prefer to get their money back, rather than have to take possession of your property. As a result, you should only borrow what you know that you can repay and never choose to let the lender take hold of your collateral rather than repay a loan.