Is Debt Consolidation the Answer?
Taking out a debt consolidation loan to replace a number of different loans may be advantageous.
The Bank of England recently published its Credit Conditions Survey for the second quarter of 2015 and it revealed a generally encouraging landscape for loan lending. The availability of secured credit to households has increased, whilst the availability of unsecured credit also remains positive.
Consumer demand for both secured and unsecured lending also increased slightly demonstrating that people are starting to feel more financially secure and ready to commit to making bigger purchases. This is further demonstrated by results that show the number of people defaulting on their debts fell slightly – a pattern that is expected to continue into the next quarter.
Another area that the Credit Conditions Survey looks at is the range of interest repayment rates for both secured and unsecured loans. The spread of these has narrowed in the last quarter and is expected to reduce further in the next quarter, meaning greater competition amongst lenders keen to offer attractive deals to customers. This is good news for borrowers as it will mean that there are potentially better loan deals available compared to the ones they are currently on.
One area that didn’t see a change in the spread of rates was credit cards, and this may mean that the interest repayment rates on these could start to become less favourable against other forms of lending.
Given the evidence of an increasingly more competitive market for secured and unsecured lending, one option borrowers may want to consider is a debt consolidation loan, which brings all their various debt repayments into one single monthly repayment. This may be more favourable especially where a borrower has credit card repayments at rates that are comparatively uncompetitive against the rates that are being offered for consolidated loans.
Of course, each person’s situation is slightly different, and a consolidated loan may not work for everyone, especially where there is an adverse credit rating. In a market where there is more choice, borrowers should also be careful not to go “shopping around” making several applications, which could generate a hard footprint that, in itself, could affect their credit rating.
The evidence of the latest survey, and predictions for the next quarter, suggest a buyers’ market for loan deals, and a debt consolidation loan could well be the answer to lock various individual loans into a more favourable overall rate of repayment.