Would life be easier just making one payment for your accounts each month?
Are you paying 20%, 25% or more interest each month on credit cards?
Are you stuck in the payday loan cycle and can't break free?
Consolidating various accounts and bills you may have is a good way to reduce your monthly payments, and also a way to save on the interest you may be paying.
Think of a consolidation loan as an umbrella loan. You are covering many smaller loan or accounts all under one loan or umbrella.
By consolidating the accounts together as one account, you can decrease your monthly outgoings, which can free up money to put into savings, or to be used to pay off the accounts at a quicker rate.
A debt consolidation loan is a loan that is taken out to pay off many smaller accounts. It is usually used to consolidate credit cards, or other accounts that may have a high interest rate.
Many credit cards have interest rates of 20%, 25% or even higher. If you have a balance on a credit card and only pay the minimum monthly payment, which can be 2.5% to 3% of the balance, and the interest rate is over 20%, you could be paying for over 10 years or more to pay the card off.
The basis of a debt consolidation loan is to consolidate these high interest rate accounts, such as credit cards, into one (1) monthly payment. And one (1) monthly payment can make life much easier.
Some people spend hours each month not just deciding which bill to pay, but when to pay them. Bills are due at different times of the month, and if you are struggling to pay one, then you need to juggle the bills.
Consolidating the accounts makes it that you have just one monthly bill to pay.
This monthly payment in some instances, may be even less than what the borrower was paying each month on the consolidated accounts all together.
The consolidation loan provides a light at the end of the debt tunnel. You know when you will be out of debt, and not in 10 years or more if you paid the credit card's minimum payment, unless 10 years is the term for the consolidation loan.
A fixed term. Credit cards are a revolving credit account. A loan can have a fixed term of 24 months, 36 months or more.
You can be paying less each month to the one consolidation loan payment, then to all the smaller accounts you are consolidating.
A lower interest rate/APR than the majority of credit cards.
You know when you will be out of debt.
A way to pay off and break out of the payday loan spiral.
Consolidating credit cards and other accounts can be a good money management tool. If by consolidating 4 accounts, a credit card, a loan, an overdraft, and a payday loan, of which the total minimum monthly payments are £466. By consolidating these accounts into one loan, and having a lower interest rate and better terms, your monthly payment may be around £296 a month, which is a saving of £170 a month!
In addition you are saving interest each month, and you will be out of debt in much quicker time frame.
If you pay the extra money you save each month on the consolidation loan, you can be out of debt at an even faster rate.
However, you need to know and understand what brought you to the point of needing a consolidation loan as well.
Paying off a few credit cards, only to use the credit cards again and run up balances on them, now on top of a consolidation loan is a recipe for financial disaster.
If this were to occur, you would then have the monthly consolidation loan payment in addition to any new credit card balances to repay.
You are cutting your expenses down and the monthly payment will be less than the cards or loans you are consolidating.
The consolidation loan's interest rate is lower than the loans or cards you are consolidating.
You pay less interest than you would on the credit cards or other loans.
You can use the loan as a way to cut back on your spending, and possibly save money as well.
The loan will not pay off the majority of the debts you want to include in the loan.
You cannot afford the monthly payment.
You require more than just paying off the accounts, you need professional advice from a debt advisor as to your options.
Some consolidation loans may charge fees to apply, or fees once you are accepted. In some cases these fees may be added to the loan. Be aware of these fees, and read all the fine print on any agreements.
Only one (1) loan payment each month.
Extended loan terms, which can reduce the monthly payment.
Lower interest rates than what you are currently paying on high interest rate credit cards.
Reduced monthly payments.
A way to break the Payday loan trap.
There is a saying, "you cannot borrow your way out of debt".
Debt consolidation loans are not for everyone, and not everyone will qualify for such a loan. If you are struggling with a few loans and by consolidating them together it reduces your monthly payment and makes your finances improve, then possibly a consolidation loan is a good choice.
A ESCO Loan Debt Consolidation Loan has no upfront fees, competitive interest rates, and credit scoring is not used to approve the loan. If you have a good ESCO Loan, you can qualify for a ESCO Loan Consolidation Loan.
Past credit issues are not a problem!
If you are struggling with your bills, credit cards and other loans due to the fact the monthly repayments for all of them are high, then a consolidation loan may make sense.
You need someone to guarantee the loan, a good ESCO Loan, a family member or friend.
They don't need to be a homeowner, but they do need good credit.
Debt consolidation loans in themselves do not affect your credit in a negative manner.
In fact, it can and should affect your credit score in a positive manner.
Your credit score is made up of many components:
Your payment history makes up 35% of your credit score, and your account balances make up 30% of your credit score. These are the lion's share of your credit score.
If you miss a few payments, or have some late payments, it has a huge impact on your credit score.
If you have your credit accounts, or credit cards near their limit, this is also going to have a large, negative affect on your credit score.
When you apply for a debt consolidation loan, it will appear as new credit, an inquiry or footprint will show on your credit report. However, once the other accounts are paid off by the consolidation loan, they will show zero balances.
So in effect, you only show one (1) open account with a balance.
This can improve your credit score!
The main concern is to not use the now paid off accounts and run up any balances on them again. Cut the credit cards up, or as long as they are not some of your oldest accounts, close them completely.
A ESCO Loan Consolidation Loan may be just what you need to help you in improving your credit score.
You may have heard of companies advertising about "Government Debt Consolidation", or "Write off Up to 80% of Your Debts".
These are misleading ads and are now investigated by the FCA/Financial Conduct Authority, who regulate the credit industry.
There are no government consolidation loans, there is no such product.
The ad regarding writing off your debts is referring to a form of insolvency, IVA's or Individual Voluntary Arrangements.
IVA's are similar to bankruptcy in that you are listed on the insolvency register, and it is a legal proceeding asking for help with your debts.
Once entered into an IVA you make payments to your creditors of what you can afford, these payments are administered by an Insolvency Practitioner.
You make these payment for a period of five (5) years, and during this time the accounts are frozen to any new interest and charges.
At the end of the five year period, any remaining balances on the accounts is "written off" by your creditors. This is not consolidating your debts in a traditional fashion.
In addition, if you own property, your property can be involved in the IVA and paying back your creditors.
IVA's do impact your credit in a negative way, just as bankruptcy does.
Many banks offer debt consolidation loans, and many offer these to homeowners, those that own property with equity.
The consolidation loan can be a secured loan to pay off the other debts/accounts, but the new loan is secured by the property.
This is a way to get a consolidation loan, however, if you were to struggle with the repayments, the property could be at risk.
In addition, many younger people under the age of 40, are not homeowners. And some that are have no equity yet in their properties, so they have nothing to borrow against.
There are loans available that can be used to consolidate debts, without the borrower owning property.
When considering a debt consolidation loan, you need to look at the accounts you wish to consolidate. Are these accounts in your name, your partner or spouse's name, or are they jointly held accounts, in both your names.
It is possible for one person to take out a consolidation loan and pay off their outstanding credit cards and other accounts, and possibly even include any jointly held accounts.
This is if they qualify for the consolidation loan and can afford the repayments on their own.
Including someone else's accounts or debts in your consolidation loan, financially doesn't make sense.
These are accounts that you are not liable for, however, if you include them and pay them off by consolidating them in with your accounts, the balances are now your responsibility in your consolidation loan.
The other person is not liable for the consolidation loan as it is in just your name.
Many times when a person applies for a consolidation loan and is including jointly held accounts, both parties will need to be on the loan. This can be due to affordability if both parties are working. By combining incomes, you may qualify for a higher loan amount and be able to include all the accounts you require.
When you have bad credit, nothing can add insult to injury more than being rejected for a consolidation loan.
The very reason you are seeking a consolidation loan may be because you are struggling to pay the credit cards and accounts you currently have, and also to pay off any payday loans that you rolled over.
The interest rates on credit cards can be over 25%, and the APR's on payday loans can be 1500% to as high as over 2000%!
In some instances the irony is that your bad credit may have been caused by struggling to pay off the high interest rate accounts, and now you may not qualify for a consolidation loan due to having bad credit.
It can seem like a vicious financial and credit circle.
In addition, many of the loans available to borrowers with bad credit, are not the type of loans that can be used to consolidate other accounts.
Some people will transfer the balances on their credit cards to other credit cards, in the hopes of reducing their monthly payments.
If you have one credit card with a low interest rate, this can be an option. However, there can be two issues with this:
You need to pay as much as you can extra on the card to make use of the lower interest rate.
Do you have a high enough credit limit on the low interest rate credit card to transfer all your balances.
In addition, some credit cards charge a balance transfer fee, which can be 2.5% or more of the balance transferred. This needs to be calculated in for any savings.
Having a guarantor for a loan is one way to consolidate your accounts, without the worry of being rejected due to bad credit history.
The strength of the loan and it being approved is on the fact there is someone guaranteeing the loan.
A ESCO Loan Consolidation Loan is a guarantor loan. If you have a good ESCO Loan, you can get a consolidation loan, even with bad credit.