Who offers debt consolidation loans?
You can get a debt consolidation loan direct from a specialist lender such as Optimum Credit, a bank or a broker/intermediary.
Why get a debt consolidation loan?
By consolidating several debts, such as outstanding loans and credit cards, into one monthly payment you could:
- Make it easier to budget for the month
- Reduce the amount that you are paying on your debt each month
- Pay off your debt over a set period
- Find that your credit rating improves from making regular reduced monthly payments
But you should only look to take out a consolidation loan if you’re going to be saving money and plan on changing spending habits so that you don’t rack up more debts.
Secured or unsecured debt consolidation loan?
There are two types of debt consolidation loan, secured and unsecured.
Secured debt consolidation loans are typically more suitable if you owe a large amount of money. Because you secure the loan against your home you may be able to borrow more and at a lower rate than you can with an unsecured loan. You can often pay the loan back over a longer time period, which may mean lower monthly payments, but could mean you pay more over the duration of the loan. Be aware that your home is at risk if you default on a secured loan.
Unsecured or personal loans can prove a good option for consolidating smaller amounts of debt. One major plus is that you don’t have to use your home as security. But this does make it riskier for the lender so they can be harder to qualify for and you may end up paying a higher interest rate.
If you’re looking to clear credit card debt, it’s worth checking out whether you can get a good balance transfer deal from another credit card provider.
What should you consider if you plan on consolidating your debt?
- Ensure you can afford the repayment plan for the length of the loan
- Check the interest rate on offer and ensure it is less than what you were paying before
- Check if there are fees for taking out the loan and factor this cost into your decision
- Check if there are fees involved for paying off your current debts early
Why get a debt consolidation loan direct from the lender?
Depending on the amount you’re borrowing it could work out cheaper as there are no broker fees, although you may have to pay a lender fee.
Going direct to the lender can mean that the loan is quicker to pay out than if you go through a broker or intermediary.
With a secured loan you still get an advised sale from a fully qualified mortgage advisor, just like you would from a broker. They’ll check that:
- You can afford the product over the proposed repayment term
- The product is appropriate to your needs and objectives
- It is the most suitable product from the range of products that the lender provides
Talk to us about taking out a secured debt consolidation loan
At Optimum Credit, we offer competitive fixed, discounted and variable rate secured debt consolidation loans of any amount from £5,000 to £1,000,000. To find out more contact us to talk to one of our fully qualified mortgage advisors.