Debt Consolidation Loans in UK

When you are struggling with your credit score, it is too difficult to deal with Debt Consolidation Loans in UK. It is going to affect your credit score if you miss payments for your debt and the debt will keep mounting. And you will be hardly eligible for lower interest loans if your credit score is poor. What you can do under these circumstances is apply for a new loan with which you can take control of your monthly payments. This is known as a debt consolidation loan.

But the problem is that you will hardly be eligible for a debt-consolidation loan when your credit score is bad. Even if you qualify for a debt consolidation loan UK when your credit is not good, you are probably not going to get a better interest rate on the new loan. Which means you have to keep paying more in interest and fees.

Even with bad credit, you might be able to get a debt consolidation loan. But before that, you must know the drawbacks like high interest and other fees. 

Benefits of a Debt Consolidation Loan

When you apply for a new loan to pay off your current debts, the new loan is called a debt consolidation loan. You can use a debt consolidation loan to pay off debts like credit card balances. Your existing debt balances will get transferred to this new loan. And you need to pay only for this new debt consolidation loan.

Convenient 

When you are making different types of payments for debts and credit cards every month, it becomes difficult to manage. You may lose track of the payments. With the debt consolidation loan you are required to make only one monthly payment instead of multiple. This is extremely convenient as you do not have to manage multiple loan payments.

Helps Your Credit

You can improve your credit utilization rate if you pay your credit card debt faster by consolidating your debt. With the help of this, you will be able to boost your credit scores as well.

Payment history is another important factor that you have to keep in mind when your goal is making your credit score better. And you will be able to improve your record with a debt consolidation loan. 

Things That You Need to Be Aware of When Applying For a Debt Consolidation Loan

When you are applying for a debt-consolidation loan with a bad credit, here are some things that you must be aware of.

  • You must think about the total cost of the loan first. Even if the rate of the new loan is lower than your present credit accounts, if the time period of the loan is too long, you have to pay more money in total because of the interest.
  • Next, you have to be aware of the set-up fee. The lender can charge you a percentage of the amount that you are going to borrow.
  • One of the most important things that you should definitely think about when you are applying for a debt consolidation loan is its impact on your credit score. You must check how much negative impact it can have on your credit score if you apply for a new account and close all the old accounts.

Things That You Have to Go Through to Get a Debt Consolidation Loan With a Bad Credit

When you have a bad credit and looking to get a debt consolidation loan, there are some serious obstacles that you may have to face.

After applying for a debt-consolidation loan, the first obstacle is getting approved for it. Some lenders are going to refuse you at the very beginning if you have a credit score below a certain threshold. Because lenders decide whether to give you a loan or not on the basis of various factors. However, your scores are not the only thing on which it depends. They will work on your debt-to-income ratio, credit history and more. If you have a bad credit, it doesn’t necessarily mean you are not ruled out.

You have to keep in mind that if you get a debt-consolidation loan while having a bad credit, most probably you are going to get it with a high-interest rate.

What to do to Get a Debt-consolidation Loan With Bad Credit

You have to research options available when the issue is debt consolidation loans for bad credit UK. You have to approach your lender with a plan and this will increase the chance to get a debt consolidation loan. Here are the things that you should do before you apply for a debt consolidation loan.

Check Your Credit Score

First, check your credit score and the details about it carefully. You will get an idea of which loan you can get easily by checking your credit score. With this, you will be able to rectify if there is an error on your credit report that is hurting your credit score. 

Expand Your Search

When you are struggling with bad credit, you must search everywhere for the best loan terms. Do not forget to check all the details about the lenders before you rule out any. Online lenders and credit unions can be better options for you.

You will find more flexibility in the loan requirements of credit unions. There is a possibility that you will get better terms from them than any random lender. You will find some online lenders also, that work with borrowers who have bad credit and struggle with it.

Consider a Co-signer with Good Credit

A co-signer is a person, who is also going to responsibly handle your personal loan with you. For this, you can ask a family member or a friend who has good credit and can help you by co-signing your loan when the issue is getting a debt consolidation loan bad credit. You will get a loan with a lower interest rate if you have a co-signer who has good credit.