Consolidation Loans Information Library

CONSOLIDATION LOANS

Want to pay off your existing debts? Find out more about Consolidation Loans.

What is a Consolidation Loan?

A consolidation loan could be classed as a 'debt' product, because it is created to assist you in paying off your existing debts. By taking a consolidation loan you are gathering up numerous debts – even to various companies or entities – and combining them.

You are then given a lower monthly payment, making the paying off process much easier to manage. You will still owe the same total amount but are able to deal with the debts in a much simpler way. Your interest payments may be reduced and you may be able to stretch the costs out for a longer period.

I have Multiple Debts. Should I get a Consolidation Loan?

This type of loan is useful for people who are finding their debts hard to control – or might even be avoiding them altogether.

By consolidating them, you only have one monthly payment to deal with. The consolidation loan company will even reduce that monthly payment so you shouldn't be under a massive financial strain.

Before you get a consolidation loan it is definitely worth considering whether you are suitable for one – after al, this is still a loan and you still owe the same total amount!

How can I get a Consolidation Loan?

There are lots of good lenders available on the internet – just look at the ones listed out on our site to compare what is on offer! Browse through the table and see what stands out, check the rates and requirements and apply when you think you have found which suits you.

To find out if you are eligible, you will have to check each provider as this part does vary. However, many lenders will ask you that have a minimum debt amount. You might have to prove that you have creditors or provide proof of your employment. Some companies will consider all applicants while others ask that you have a good credit history.

Generally the providers we list at Bad Credit Good Solutions are those who will take on people with a bad credit rating so you are more likely to find one which will accept you.

Will I pay APR?

Yes; this is a loan so you are borrowing with interest, as normal. The amount of interest that you will be charged really depends on the lender – some offer as little as around 9% while others have much higher rates. This is just another area you should compare when looking for a consolidation loan.

You will notice that from 1st February 2011, on personal loans and credit cards the 'typical' APR is no longer displayed. Instead, you can now see 'representative' APR. This is part of a new set of rules to improve transparency for loan applicants. Representative APR only has to be offered to 51% of customers, meaning that you are now less likely to receive the rate that is advertised. However, as before APR is determined according to your personal circumstances.

Will my Credit Rating Improve?

If you can pay off your consolidation loan on time and without adding further debts, then your credit rating could be affected in a positive way. However, if you do not pay off the loan fully and in a timely manner you do risk damaging your rating further.

However, by taking a consolidation loan you are taking steps towards paying off your existing multiple debts – so you are taking action to get rid of owed money. In your current situation, you are likely to be weighing heavy on your credit rating as it is!

Are there any Risks?

Some people might think that by taking a consolidation loan, their debts have been dealt with. But in fact they still owe the same amount of money – the difference is that it has become easier to deal with.

By taking such a loan, you might also be spreading your costs over a longer period of time, so you might be dealing with those debts for longer.

Any loan carries risk: you might not be able to make the monthly repayments which could damage your credit rating further, so make sure you consider any type of loan before you apply.