If you feel that your debt is going out of your head and you are unable to do something about it then a debt consolidation loan can help you in this situation.
Most Britons are finding themselves trapped in a debt cycle. Every month most of their paycheck goes into interest payment of different loans taken by them. Hence, they are left with very less amount to spend throughout the month. This makes their financial situation very difficult. One way to come out of this mess is through a debt consolidation loan for bad credit with no guarantor.
Getting a debt consolidation loan is a way to get fund to pay off your overdue bills and other debts. You can use this loan to reduce your monthly repayment to a manageable amount that is only one payment per month rather than multiple payments.
There are many lenders and financial institution who offer this type of loans. These include banks, credit unions, marketplace lenders, etc.
If you are considering applying for a debt consolidation loan, you should be well aware of the types of loans available in the market and different terms and conditions.
You cannot depend on the lenders to provide you the best offer for your condition. However, they will help you to make your decision.
Generally, there are two types of loans which you can apply for.
Secured Loan
It might be a good option for you to pay off all your existing debts in one go through a secured loan. A secured loan requires your house or some other type of valuable property as collateral. The lenders use collateral as a way to make themselves secure from any probable loss in case of non-repayment of the loan. Additionally, if you fail to repay your debt consolidation loan, lenders have the right to take possession of the collateral and sell them to recover their loss.
One benefit of applying for this type of loan is a lower rate of interest due to collateral. While you may be able to get a lower payment and rate of interest rate, over the time you could end up paying more if you take more years to repay your debt consolidation loan.
Unsecured Loan
This type of loan is unsecured because there is no security or collateral attached to it. Most lenders approve this loan to the borrowers who have a low credit score at a higher rate of interest. The reason behind a high rate of interest is no involvement of security.
In the absence of any security, the lenders may have to incur huge loss if you fail to make repayment of the loan. So, in order to compensate for the loss, they charge a high rate of interest.
Should One Consider Applying For a Debt Consolidation Loan?
Ultimately, the decision to apply for a debt consolidation loan depends on an individual. But you should consider your situation very well. Ask yourself do you really need a loan to bring back your financial life on track? You can discuss it to your spouse or family members.
Talk to your current lenders and try to negotiate and settle the loan if possible. There is no doubt about it that you have to take a debt consolidation loan if you are unable to make your ends meet. But do it with utmost caution and don’t get trap in debt consolidation scam. Take a loan from an FCA authorized lender only.
In conclusion, we can say that a debt consolidation loan offered by online lenders can bring much relief in your life only if you make proper use of this service. The first step which you should take is to do some online research and asks for quotes from different lenders. Compare the terms and conditions offered by different lenders and choose wisely. Always try to make repayment of the loan on time.
