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Debt Consolidation Loans

A debt consolidation loan is a loan taken out to repay (consolidate) other loans or debts in to one larger debt and therefore one monthly payment. You may have a number of debts such as credit cards and other loans with increasing and difficult to manage monthly payments.

A consolidation loan can reduce your total monthly outgoing and make managing these debts easier.

You can apply for a consolidation loan if:-

  1. you satisfy lending criteria
  2. your credit rating is adequate
  3. you have surplus monthly household funds available to repay the loan over the stipulated term
  4. you are a tenant or own a property

Advantages of Debt Consolidation

  1. You will not have to enter into any insolvency debt resolution if you can raise sufficient funds to repay all your creditors in full
  2. The consolidated monthly contractual payment may be reduced
  3. The period of the loan will be defined
  4. There is no upper limit for borrowing regarding your unsecured and secured debts but this will depend on your circumstances
  5. You will only have to deal with one creditor
  6. Your credit rating will not be affected if you do not default on loan repayments

Disadvantages of Debt Consolidation

  1. If the loan does not cover all your debts then the new loan will simply add to your debt burden
  2. If you have a poor credit history interest rates may be higher so you will pay more
  3. You cannot obtain a secured loan if you do not have a property
  4. If you re-mortgage your home, you may be incurring additional interest over the remaining term of your mortgage or may extend the term of your mortgage
  5. Secured loan repayments will be in addition to mortgage repayments
  6. Interest rates may not be fixed and it may be difficult to work out what the total cost of the loan will be
  7. If you obtain a mortgage or secured loan this may involve an arrangement fee
  8. If you default on mortgage or secured loan repayments your home may be at risk of repossession
  9. If you default  on any mortgage, secured loan or unsecured loan repayments you may be at risk of bankruptcy
  10. Your credit rating will be affected if you default on loan repayments

X-debt do not assist clients with any type of investment advice and you should seek specific advice from an independent regulated person at the Financial Conduct Authority. The above information is generic information and should not be constituted as specific advice to an individual.

If you are struggling with your debts and considering taking out a consolidation loan there maybe a more appropriate solution including an IVA.

Contact us now on 0800 043 2424 to speak to an advisor.

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