Debt Consolidation Loans Bad Credit

Debt consolidation loans bad credit – are you suffering from bad credit and mounting multiple loans? We can help. With our services, you’ll be able to apply for debt consolidation bad credit UK loans.

Debt Consolidation Loans Bad credit are a simple, stress-free way to reduce the number of payments you make each month and replace them with an affordable single amount.

Debt consolidation is a great way to repay multiple creditors. The solution should be open to you if you have a poor credit history and enable you to rebuild your credit score.

Consolidating multiple debts means you don’t have to juggle a variety of obligations. A debt consolidation loan saves an enormous amount of hassle. And the interest rate will be lower than the collective of all your other borrowing.

You can use a debt consolidation loan to repay credit cards, store finance, overdrafts, payday loans, hire purchase finance and other loans.

If you are struggling to repay your debts or to manage your monthly outgoings a debt consolidation loan can be a good option to enable you to get your finances back on track and banish those sleepless nights.

What is a debt consolidation loan?

A debt consolidation loan for Bad credit means you borrow enough money to pay off all your current debts and owe money to just one lender.

There are two types of debt consolidation loan. A secured loan, where the money borrowed is secured against an asset – usually a house. Or an unsecured loan. You can also draw out personal consolidation loans for bad credit if you have a poor credit score.

When to consider a debt consolidation loan

Consolidating debts makes sense if:

  • You are eating into your savings or living beyond your means;
  • You can afford to keep up payments until the loan is repaid;
  • You use it as an opportunity to cut your spending and get back on track.

With a debt consolidation loan you end up paying less interest than you were paying before and the total amount payable is usually lower overall. Sometimes it could be more if you repay over a longer period.

Before you go ahead with a debt consolidation loan, it is a good idea to think about anything that might happen in the future. Consider what could crop up which would stop you being able to keep up with repayments.

For example, what if interest rates go up, or you fall ill or you or your partner lose your job?

Debt consolidation loans for problem borrowing

Many of us bury our heads when debt becomes a problem. We can also be tempted to hide the level of borrowing that we’ve racked up from partners, family and friends – even ourselves.

You can only sort out your debts if you know the scale of them. So take the time to write down everything you owe and remember there are solutions, including a debt consolidation loan.

Problem debts simply come from spending money you don’t have. This could be for frivolous reasons. Perhaps you made a mistake or a bad decision. Or you may have had a change in personal circumstances, like the death of a partner, personal illness, divorce, mental health problems or losing your job.

Whatever the reason for the problem debt, it’s time to make a change and from now on the reason why you may have ended up in a muddle is really rather irrelevant.

The most important thing you can do is get a handle on your spending and find a way to reduce your outgoings. A debt consolidation loan is one option you should consider.

How a debt consolidation loan works

You should work out exactly how much you owe, to everyone, and then apply for that figure – or a little higher – to apply for a debt consolidation loan.

The lender will consider your application and it will usually decide on the APR (interest rate) which would apply to the loan based on your credit score and circumstances.

The lender may ask that you secure the loan on your house or your car. Remember, you could lose your home or your car if you fall behind on repayments.

Once you have been approved for a debt consolidation loan, you would pay off all of your creditors and close all of the accounts.

How debt consolidation can help

If you’ve got lots of different debts and you’re struggling to keep up with repayments, you can repay them all and put the balances into one loan to lower your monthly payments. With credit card debt consolidation loan for bad credit, you can put an end to your financial struggles.

It can be very stressful and confusing If you have multiple creditors each asking for money. Managing them and ensuring each gets paid on time is not only time-consuming it can sometimes be very difficult.

This is where debt consolidation comes in. Instead of juggling bills to all your creditors, you can pay them all off and hopefully never have to worry about these firms again. Some companies can be relentless when it comes to chasing people for money.

Then, once your debt consolidation loan is agreed, all you need to do is focus on making one affordable payment each month. As well as this, you can:

    • Ensure the loan is tailored to your circumstances;
    • Agree on a fixed repayment rate so you know exactly what to pay;
    • Begin to improve your credit score;
    • Think about starting saving again with the money you have left each month.

A debt consolidation loan may run for longer than your existing commitments. But that reflects the lower monthly repayments you will be making.

With a debt consolidation loan you won’t decrease the total amount of your debt. You would simply either reduce the interest you’re paying, or extend the payment period.

The exact terms will depend on your credit rating and the product you choose. You should always check the small print of any debt consolidation loan in order to make sure you’re getting the benefits you need. Also, debt consolidation loans bad credit can help you to improve your credit card score and lower your rate of interest in the long run. For more details on how can, consolidation loans could help in you these scenarios feel free to contact us.

Debt consolidation loans to repay credit cards

If you can’t stop spending on credit cards, for example, because you’re using them to pay household bills and to buy essentials like food and clothing then this can be a sign of problem debt.

Debt consolidation loans are a good option for problem debts, particularly credit cards which may have a high APR. Late payments on credit cards can be costly and have a detrimental effect on your credit rating. Hence, opting for credit card debt consolidation loans for bad credit could help you out.

Often we use our credit cards for big purchases such as a holiday or for home improvements. The interest rates on credit cards – and only being able to afford the minimum monthly figure – can make repaying the total balance difficult. So it may make more sense to pay off the credit card with a debt consolidation loan.

Debt consolidation loans to repay car finance

Cars are often the second biggest purchase we make – after our houses.

You could sell the car to repay the finance, but for most of us our cars are simply essential. And the value of the vehicle may have dropped meaning a sale price would not cover the remaining balance owed.

That means that considering adding the car hire purchase figure to a debt consolidation loan is worthwhile. Remember you may be paying for the car for longer as its value drops.

Debt consolidation loans to repay overdrafts

Overdrafts can seem like a simple way to borrow. After all, the overdraft is linked to your bank account and provided by your current bank, with whom you are familiar.

But the longer you use an overdraft, the more you have to pay. The rates and charges associated with an overdraft are rarely favourable and it can be all too easy to live in your overdraft every month. This can become a cycle which is difficult to get out of.

From April 2020 the rules around overdrafts changed. Banks are now required to simplify overdraft interest rates and replace per-day fees with a simple annual interest rate.

This follows a crackdown by the regulator, the Financial Conduct Authority (FCA). The aim was to make overdraft pricing fairer, but a lot of overdraft users will be hit now the changes have kicked in. Some banks have hiked their interest rates on overdrafts which has made many people worse off.

Getting out of your overdraft is even more important now that banks and building societies are shaking up how they charge customers for going into the red.

You could talk to your bank and find out If they have a cheaper way for you to borrow. You could also agree to a plan to reduce your overdraft – either all in one go or incrementally each month. You could switch to a different bank, with a cheaper overdraft rate or you could take out a new personal loan to pay it off.

But for many people, these simply aren’t options. If you have multiple debts alongside your overdraft, it may make more sense to consolidate the overdraft with all of your other borrowing to make a fresh start with a lower monthly repayment.

Debt consolidation loans to repay payday loans

Payday loans are an expensive way to borrow. But sometimes we can feel like there is little alternative than to lend an amount to cover unexpected expenses or a short term cash flow problem.

Issues with payday loans can quickly mount up if you find that you are unable to repay the amount you have agreed upon exactly when the payday loan lender requires it. Consolidating them too is a good way to get out of the payday lending cycle.

Why think about Debt Consolidation?

  • Make progress by improving your monthly budgeting
    Paying just one loan repayment will help you to manage your personal budget every month.
  • Reduced the total amount you repay
    If your loan interest rate is less than the combined total interest of the previous loans, you will pay less overall.
  • A better credit score
    If you prove that you are a responsible borrower by paying off your loan in full, it will have a positive effect on your credit score.

 

When debt becomes a problem, consider consolidation

If you live beyond your means every month, it makes sense to consider consolidating your debt. If you find you have to use your credit card each month, are falling behind with repayments or live constantly in your overdraft then debt has become a problem. If you are one of those whose credit scores are deteriorating due to failed repayments then you must definitely go for consolidation loans for bad credit UK.

Do I qualify for an unsecured debt consolidation loan?

Before you consider applying for an unsecured debt consolidation loan, think about whether you can fulfill the following criteria:

      • You have a sustainable and regular source of income with which to make the loan repayments;
      • After deductions and considering your budget, you can afford to make the loan repayments;
      • You are a UK resident;
      • You have a reasonable credit rating.
      • Whether a secured loan may be more affordable and an option for you

Secured debt consolidation loans

Debt consolidation loans that are secured against your home or are sometimes called homeowner loans.

A secured loan can be a good idea if you owe a lot of money or if you have a poor credit history. You can keep your home as a collateral for drawing out this debt consolidation loans bad credit.

The qualifying criteria for an unsecured debt consolidation loan will be different for a secured loan. Because you will be securing the sum, a good or reasonable credit rating may not be required. However, to be eligible for a secured loan, you need an asset with sufficient value to use as collateral, such as your home or car.

Secured and unsecured debt consolidation can be used to repay your creditors and just focus on one monthly repayment. Generally, if you’re looking to borrow large sums of money – and believe you can keep up with the repayments – then a secured loan may be the only option.

However, an unsecured loan might be a better option if you want the security of knowing your property isn’t at risk. You should think carefully about what it is – and what you could lose – if you secure a loan against an asset.

It is prudent to access some free debt advice before you consider taking out a secured debt consolidation loan. Secured loans are not right for everyone.

Fees and charges for debt consolidation loans

Beware of the high fees some companies charge for arranging a debt consolidation loan. At debtconsolidationloans.co.uk we do not charge fees for our services.

Before applying for a debt consolidation loan, read the small print carefully for any extra fees or charges before you sign anything.

Also, and very importantly, check whether there are any fees for paying off the existing loans and finance you have early as this could cancel out any savings you make.

Avoid paying a fee for a company to arrange the loan on your behalf unless you’re getting specialist advice (and you’re sure it’s worth the cost).

Why think about Debt Consolidation?

  • Make progress by improving your monthly budgeting
    Paying just one loan repayment will help you to manage your personal budget every month.
  • Reduced the total amount you repay
    If your loan interest rate is less than the combined total interest of the previous loans, you will pay less overall.
  • A better credit score
    If you prove that you are a responsible borrower by paying off your loan in full, it will have a positive effect on your credit score.

 

Debt consolidation loans and bad credit

Debt consolidation is certainly open to you if you have poor or bad credit. Debt consolidation loans are used by many people with a less than favourable credit history. Whether you are wondering about bad credit score or tired of thinking about where to get a consolidation loan with bad credit, we are here to help you out.

All credit scores are considered by lenders. There is no such thing as a “black list” for credit history. You’ve got nothing to lose by getting in touch.

All you have to do is use our quick application form, tell us a little bit about yourself, and you could have the funds you need quickly.

Understanding your credit score

It is a good idea to take a look at your credit score before you apply for a debt consolidation loan.

The two big credit agencies in the UK are Experian and Equifax. Both use different criteria to assess a person’s history and calculate a credit rating.

As a rule of thumb, Experian assesses credit scores out of a total of 999. A score up to 720 is generally regarded as being ‘poor’ or ‘very poor’. Equifax, on the other hand, classifies scores out of 700 and will detail ratings under 380 as being ‘poor’. Not all lenders will take this view however. And how a lender rates your score varies between each one.

Good news though, regardless of how poor your credit score might be, debt consolidation is still an option and if you apply we’ll help find the best loan for your needs and circumstances.

Can I apply for a debt consolidation loan with no credit check?

If you do have a history of poor credit, you might get a bit nervous about making an application for a debt consolidation loan. You can not take out a debt consolidation loan without a credit check though.

Once you apply for debt consolidation, your credit score will be checked. Still – even if you have a very bad credit score – all ratings are considered.

Having a poor history – in itself – may not cause your application to fail. In fact, you have nothing to lose by applying for a debt consolidation loan today.

Do debt consolidation loans hurt your credit score?

Taking out debt consolidation can be a good way to improve your credit history. However, your rating may initially fall a little as you are taking out a new credit agreement.

Beware of applying for lots of loans. A record of applications stays on your file and potential lenders may worry you have become desperate for the money. A specialist debt consolidation provider such as ourselves has access to a panel of many lenders and can select the best option to apply to so you don’t have to search.

Debt consolidation to improve your credit score

Eventually though, your credit score should improve as you make regular payments on time on the debt consolidation loan.

Furthermore, as your credit utilisation ratio decreases and the number of creditors reduces, you should also start to see improvements in your credit rating.

Improving your credit rating potentially giving you access to better rates of interest and other financial products in the future.

Using the funds from a debt consolidation loan to pay off several different creditors and then closing those accounts demonstrates that you have control of your debts.

Credit scoring considers your credit utilisation. This is an indicator of how much available credit you have and how much you are using. For example, if you had just one credit card with a limit of £1,000, and if the balance is £500, your ratio would be 50%.

Once you have consolidated your debts, repaid and closed your other accounts and begin to make payments on the new debt consolidation loan your ratio will decrease. As a rule of thumb, lenders tend to recommend the figure be kept below 30%.

Your payment history will improve with a debt consolidation loan providing you keep to the terms of it. Making regular payments on-time towards one creditor is a great sign that you’re responsible with money. This will be reflected in your credit score in time.

Should I consolidate my debt before applying for a mortgage?

Getting a mortgage to buy a property is usually the biggest financial decision most of us will make. Problem debts can reduce your chances of turning the dream of owning a house more difficult.

During the mortgage application process the bank or building society will check your financial standing, history and credit report.

The potential lender will check details of what financial products you are using and how you have used them. This will include all borrowing, credit cards and personal loans.

The lender will check your repayment history and look at whether any action has been against you. The mortgage provider will consider any arrears, late payments or county court judgements and consider these to be a negative sign of how you manage money.

The mortgage provider has to satisfy themselves that you’ll be able to repay the loan they may be about to offer and that it will be affordable to you over a period of time.

There are strict rules to ensure mortgage lenders only provide money to people who can afford to repay it. As a result, if the credit report indicates to the lender that you have had issues with repaying debts before, that provider may be reluctant to approve the mortgage.

If you already have a lot of debt, the mortgage provider might determine that the property loan could push you into financial difficulty. This may apply even if you’re paying everything on time.

How a lender approves a mortgage is calculated on risk and potential ‘what if’ scenarios. Resolving multiple debts by consolidating them should paint a much more positive picture of your circumstances to the mortgage lender.

With a debt consolidation loan, you will have successfully cleared monies you owe. These accounts will then be recorded as ‘closed’ or ‘paid in full’ on your credit file.

If you’ve paid off all your accounts in full this should demonstrate you’re far more responsible than someone with multiple debts who has had difficulty in paying them back as required.

A big part of getting approval for a mortgage is your debt-to-income ratio. If you reduce your debt by paying it off quickly after consolidation, then you will be in a better position when you apply for a mortgage.

Are there alternatives to debt consolidation?

There are alternatives to debt consolidation. Each one differs. Whether you want credit card or personal consolidation loans for bad credit UK, options are available. You can think about reducing how much you owe or how much you pay by looking at other products.

One option to consolidate your debts is through a credit card balance transfer. If you have a lot of credit card debt across several accounts, you could potentially combine all this into one amount. If you can find a provider which offers 0% interest – or a low APR – on balance transfers, this could be a good way to consolidate what you owe.

However, this does have some drawbacks:

      • Many providers will charge you a fee for moving debts to a balance transfer card;
      • A 0% or low interest period is usually an introductory offer. If you don’t clear your debts during this time, you could be charged expensive rates of interest.
      • Good credit card offers are only available to people with good credit scores.

If you’ve been putting money into a pension, and you’re over the age of 55, you might be able to withdraw funds from it to repay some of your debts.

In theory, you should be able to withdraw as much as you like. However, this method should be considered a last resort as the more money you withdraw from your pension, the less you’ll have to live on when you retire.

Although a debt consolidation loan is a specialist product designed to help you get on top of your finances, a personal loan could also do the job. However, the problem with this option is that lenders will typically offer the best interest rates and offers to those with excellent credit scores.

It is likely that if you’re already juggling and behind with multiple debts, your credit score won’t allow you access to some of these products. If this is the case a debt consolidation loan will probably offer a better deal than some of the more expensive finance products available to people with less than perfect credit scores.

Can you use a normal person loan to consolidate debt?

It is possible to apply for a personal loan to repay other multiple debts. But some lenders will not let you do this and may have a set list of purposes for the personal loans they approve.

It may also be the case that you would be unable to borrow enough from a personal loan to repay all of your debts. This will depend on your circumstances and credit score. Often personal loans are offered with a shorter repayment term than you would need to repay all the debts you have with an affordable monthly payment.

What debts can’t be consolidated?

There are some types of borrowing which sometimes can’t be resolved through a consolidation loan. Some of the most common include:

      • Mortgage and other home loans;
      • Certain car finance products;
      • Back taxes;
      • Court fines.

Although these are a few examples there are many types of debt. If you’re wondering whether a consolidation loan could be used to repay certain types of credit, you should ask us for impartial advice – at no cost – whether we think a debt consolidation loan is the best solution for you.

When not to consider a debt consolidation loan

A debt consolidation loan probably doesn’t make sense if:

          • You can’t afford the new loan payments even if they are lower;
          • You think your circumstances are about to change in the short to medium term. Think carefully about what is going to change and how it might impact on your ability to repay the consolidation loan;
          • You won’t clear all your debts with the loan, particularly the problem ones.

Debt consolidation FAQs

How much does a debt consolidation loan cost?

As a broker who searches the market for the best product to meet your circumstances and needs, the loan available to you is dependent on your provider.

However, because we want to ensure you’re getting a fair deal – and that consolidation is the best option for you – we’ll ensure to make sure your loan is fair, affordable, transparent and suited to you.

What is APR?

APR stands for annual percentage rate. It reflects the interest rate which determines the ultimate cost of borrowing. Under the UK’s financial conduct rules, All lenders must disclose the APR on each product.

When will I have to make my repayments?

The frequency of repayments can usually be agreed with you. The details of your repayments can be found in the policy documents issued by your consolidation loan provider. If you can’t find these, contact the organisation.

When will I get the loan?

You could get the money you need within 24 hours. However, the exact timescale depends on your consolidation loan provider and how quickly the application process is approved.

How do I use a debt consolidation loan?

Once you have the money you need, you use the funds to close accounts with your creditors one by one.

How do I get a debt consolidation loan?

If you have decided to take out a debt consolidation loan then you need to find a lender willing to let you borrow an amount large enough to cover your existing debts.

This may be a bank or building society, but there are also debt consolidation firms that you can contact such as ourselves who offer specialised services.

If you’re worried you don’t entirely meet the criteria for debt consolidation but think this loan would be perfect for you, then all is not lost. Initially, you should speak with one of our advisers and they’ll be able to identify whether debt consolidation is possible.

Chances are, as a broker, we should be able to identify a provider willing to help you.

If you are not currently eligible for debt consolidation, then our advisers can look at the reasons and specify what you could do to change that. Alternatively, they may be able to identify another more suitable solution.

Is a Debt Management Plan a better option?

If you are not in a severe enough situation to have to consider bankruptcy or an Individual Voluntary Arrangement (IVA), then a Debt Management Plan (DMP) might be an option.

A DMP allows you to make smaller monthly repayments. This will be at an amount that you can afford. You may be repaying your debt for longer but the total figure will reduce. Many creditors will stop charging interest once the DMP is set up.

You can set up a DMP yourself. You would begin by drawing up a fair and realistic household budget, then contact your creditors and ask them to consider what you can afford. They do not need to accept your request but they must be fair in making their decision.

You can have a Debt Management Plan managed by someone else. This operates more like debt consolidation and may be suitable if you have bad credit. Charities like StepChange offer this service free of charge.

You will make one monthly payment to a debt management charity. They will negotiate with your creditors and pay them on your behalf. This is a little like having all of your debts in one place and have the benefit of lower monthly repayments.

Debt Management Plans can be significantly cheaper if the companies you owe money to reduce their interest, repayments and charges. They will usually put a hold on your account and this can prevent you from borrowing more money or using your existing credit cards.

A DMP will almost always affect your credit score. This is because you have agreed to pay less than you originally did. You should carefully consider this before you proceed with a DMP as it may make accessing other financial products very difficult for some time.

Where else can I seek advice on my debts?

The Money Advice Service is a government-backed website which lists all of the help available to people in the UK worried about their debts.  Whether you want to learn the ins and outs of this loan or know answers to questions like where to get a consolidation loan with bad credit then make sure to visit their site. You can find out how to access other resources here.

Why think about Debt Consolidation?

  • Make progress by improving your monthly budgeting
    Paying just one loan repayment will help you to manage your personal budget every month.
  • Reduced the total amount you repay
    If your loan interest rate is less than the combined total interest of the previous loans, you will pay less overall.
  • A better credit score
    If you prove that you are a responsible borrower by paying off your loan in full, it will have a positive effect on your credit score.