While taking out a new loan for immediately paying off old balance payments, you must ensure that such unsecured debt consolidation loan does not become a new burden on your finances. You should avail the loan with utmost care.
These loans give access to smaller finance for paying off your unsecured loans, credit card and departmental store card outstanding amount. Then, you make monthly payment to single lender. Often, monthly outgoings towards the new loan installments are down substantially, as the loan comes at lower rate of interest. Another reason for picking up the consolidation loan could be that you do not want to carry the debts for longer period. An early repayment can save you lots of money on interest.
Unsecured debt consolidation loans are of smaller amounts, ranging from £5000 to £25000. in determining the loan amount, your balance payments towards old loans and your personal circumstances like credit history play a role.
These are short-term loans. The borrowed amount carries for repayment duration of few months to 15 years, depending on your circumstances.
You must note that these loans carry a little higher rate of interest. This clearly means that you must make a good search for a suitable deal, which has a lower rate as compared to the rate on your existing debts.
An excellent or good credit history is helpful in borrowing the money at lower rate of interest. In the case of bad credit history of making late payments, payment defaults and arrears or CCJs, the loan will come at higher interest rate. Your aim should be to pay off the loans immediately.
It is advisable to compare as many lenders as possible for finding out suitable unsecured debt consolidation loans. You should apply for the rate quotes in order to make the comparison fruitful. Ensure that you repay the loan installments for escaping any new debt and for improving your credit rating.