Late and missed payments, along with other external factors, can have a negative effect on your credit score.
Late and missed payments, along with other external factors, can have a negative effect on your credit score.
If you need to consolidate debt, the usual solution is to take out debt consolidation loans to pay off those existing debts. However, if you do want to get a loan for debt consolidation they tend to come with additional costs attached as well as some risks, so it's essential to understand what taking out one of these loans involves before making an application for credit.
Debt consolidation loans are a form of a loan which can be used to combine an individual’s existing debts into a single pot. Borrowers make an application for a loan for the full amount of what they currently owe to multiple other lenders. If their application is approved, those funds can then be used to pay off the other loans completely.
The new loan will then be paid off over time, typically in a specific number of monthly repayments.
Debt consolidation loans are designed to make debt simpler to manage while also possibly reducing the amount of interest you're required to pay. This is done by bringing all your debt together in a single location, sometimes at a lower rate of interest.
Creditspring provide an option as debt consolidation loans for bad credit consumers. Through our simple to understand model you know exactly what you need to pay, when you need to pay it and helpfully there is no interest on the loan itself. You do need to pay a monthly fee, which gives you access to your loan (we split the loan into two equal parts). One way to think of it is as a subscription model for finance – like a Netflix, Amazon Prime or even your mobile phone contract.
Our existing members find this model much easier to follow and means that getting a personal loan for debt consolidation feels less stressful. As far as consolidation loans in the UK are concerned, we feel we have a solid option for people.
Our loans range from £400 (at £7pm, 88.8% APR) with our Step product and go all the way to £2,400 (at £24pm, 43.1% APR) with our Extra product.
Once approved for a loan we place no conditions on how you use those funds. So, if you are after a debt consolidation loan for bad credit in the UK, check your eligibility for a Creditspring loan.
There are some advantages to taking out a debt consolidation loan, although they aren't suitable for everybody.
If you choose to use a debt consolidation loan, you'll only need to pay a single organisation every month, making it simpler to manage your budget. However, the payments to that single organisation may be substantial, and the term of the loan may be long.
This will cause you to pay more overall across the loan's entire term. For this reason, it's vital to check whether you can afford to make the repayments before taking out a debt consolidation loan.
If you are already finding it hard to pay back your existing debts, you may struggle to afford to make payments towards your debt consolidation loan. If you have only a few debts and already have a low APR, it could be worth focusing on your current repayment plans rather than taking out a new line of credit.
Alternatively, if you have only modest credit card debt, you may prefer to take out a new 0% interest balance transfer card as an alternative.
Conversely, if you have very substantial debts and are finding it hard to make your repayments, you may find that choosing a debt management plan is a better choice for you.
You can potentially lower the amount you have to pay each month by spreading your debt over an extended period.
You can potentially get a low interest debt consolidation loan, thereby reducing the amount of interest you have to pay, particularly if some or all your current debts have a high rate of interest.
You can improve your credit score by making manageable and regular repayments.
It’s simpler to manage your debt since you’ll only be paying a single organisation, not several.
If you miss payments on your debt consolidation loan, you'll find your credit score takes a significant hit.
Any possible savings you make could be cancelled out by the extra fees and charges you must pay to settle your existing loans or set the loan up in the first place. You could even end up paying more than your original amount.
If you've taken out a secured debt consolidation loan, you could lose your car or home if you default on your repayments. This won’t be the case if you take out an unsecured debt consolidation loan but typically the interest rates you will pay may be higher.
Although debt consolidation loans are a helpful solution, it's important to remember that if you have experienced or are experiencing debt problems, you may not be able to obtain this type of loan. This is because lenders view those with a poor credit history as a risk and prefer not to lend to them. You may be able to secure a debt consolidation loan from certain lenders if your credit score is poor, but you won't be able to access the best deals.
The interest rates you will be offered will be significantly higher, and you may not be able to borrow as large a sum as you require. However, there are some lenders who specialise in providing debt consolidation loans for poor credit consumers.
Again, the deals you are likely to be offered won’t be the most attractive, but they will enable you to gain access to the funds you need to pay off your existing debts. In some cases, people with poor credit may find that providers will only offer them a personal loan for debt consolidation if it is secured against their property rather than offering them an unsecured loan.
This could be a good choice, but only if you're confident you can make all your repayments as otherwise, your home will be at risk. On the upside, if you’re able to make your debt consolidation loan repayments on time, you should see your credit score improve over time.
It’s not uncommon for people to use their credit cards as a means to consolidate their repayments and only have a single payment to make. Whilst this does achieve the aim of reducing the number of payments you need to make, it is worth considering the real cost of doing this. Credit card often charge a significantly higher interest rate than you usually get on a secured loan for debt consolidation, or an unsecured one for that matter.
The other element that people often forget is that a credit card will charge you interest on the amount outstanding so unless you pay off the balance in full it will create a significant hole in your finances. The safety and consistency of payments of a loan means it is a much better option if you are looking to consolidate debt from several lenders.
The interest rate on any debt consolidation loan will vary depending on the duration and size of the loan.
Loans that extend over a longer period could have a lower interest rate, but the repayments will need to be made over a longer timeframe, leading to paying more in the long run.
Borrowers who have a poor credit record will find that the rate of interest they are charged on their debt consolidation loan will be higher.
The key difference between the two is whether the lender is provided with some assets from which to realise some value should anything go wrong with repayments. Usually this could be your car, or even your house, depending on the size of the loan you are after.
An unsecured loan doesn’t make any provision for any assets you may own and therefore there is little risk of you losing your car, for example if you were unable to keep up with repayments.
However, unsecured loans because they are more risky from a lender’s perspective, will typically carry higher interest rates on their loan. So, whilst nothing is at risk for you, you do have to pay more on a monthly basis to ensure that is the case.
Every individual will have their own specific circumstances where one makes more sense than the other, but it definitely pays to review the terms of any offer from a lender and ensure you really understand what your commitments are as well as any impacts of missed or late payments.
If you take out a debt consolidation loan, you can use it to pay off a wide variety of kinds of debt, including:
Debt on credit cards: Many credit cards charge a high APR, making them a costly way of borrowing in the long term.
Debt from personal loans: You may have taken out one or more unsecured loans to pay for a holiday, home improvements, a car, or other unexpected expenses.
Overdrafts: Interest rates can be high on overdrafts, and, over time, this can lead to a large amount of debt.
Store cards: Many store cards will offer attractive discounts on upfront spending, but high fees and APRs creep in over time.
So, for example, if you owe £1,000 on your credit card, another £1,000 on your store card, have a loan of £2,000 and have an overdraft of £1,000, you can apply for a debt consolidation loan for £5,000 to pay them all off in one go.
You will then repay that total amount back to a single loan company over a specified period.
While some personal loans could be used to consolidate debts, some lenders want borrowers to use their loan for a specific purpose, for example, home renovations or purchasing a vehicle.
Therefore, you need to check before applying that the loan you choose is suitable for debt consolidation. If your debts are large, you may also discover that you don't qualify for low-cost personal loans.
A Creditspring membership is an excellent solution if you need to pay off expensive debts. Over time, many people build up debts with several organisations and institutions, all at different rates of interest and periods.
This can lead to repayments on different dates and in different amounts, so it isn't too surprising that this becomes very confusing and can lead to overpayments or missed payments. Consolidating your debt could be an excellent choice if you want to find a way to budget more effectively, reduce the amount of interest you pay, and make your life simpler.
If you have several small debts that attract a high rate of interest and you're able to access other lines of credit, it certainly makes sense to take out a new, cheaper consolidation loan to pay them off and simplify your situation. However, depending on your circumstances, you may find that the right debt consolidation product for you could differ. You may find large debt consolidation loans out there, but consolidating smaller debts is also possible.
Creditspring helps our members consolidate debts that are small yet expensive. By doing this, it has been able to help many members escape costly payday loans and expensive overdrafts. And as you pay no interest on our loans, they are often much more cost efficient than alternatives. Whilst the loans carry no interest, there is a small monthly fee to pay.
Creditspring will let you know if you’re eligible for our products within seconds of making your application, but you can rest assured that simply checking whether you’re eligible won’t have a negative effect on your credit rating.
If you're struggling to work out whether consolidating your debts is right for you, it's possible to seek independent specialist advice online or from several agencies. We recommend Money Helper.
When it comes to consolidating debt, the thing to keep in mind is making sure that the new loan you're taking on will completely cover your old debts while also being a suitable and affordable repayment structure. Although Creditspring isn't the most obvious choice for obtaining a debt consolidation loan in the UK, many members have used their Creditspring loans for precisely this purpose. As a Creditspring loan has no interest and comes with capped costs, it’s an excellent way to consolidate your high interest debts safely and simply.
Why not check whether you’re eligible now? Just fill in your details here. It’ll take just 60 seconds and won’t harm your credit rating!