Debt Consolidation Loan – Pros and Cons 

Debts can cause sleepless nights and there is nothing new in this fact. It is daunting to manage multiple debt payments at the same time. Losing track would be easy as you might have to pay them individually.

You have to remember their date of payments individually. Some of them might fall on the same date, while others might differ. In the meantime, if you forget, your burden is going to increase further.

There is a smart and effective way to overcome this ordeal: debt consolidation. Specific loans let you combine debts and pay them together.

This is only possible with the help of a loan, and you cannot do it on your own. Now, you might wonder if getting a loan for this purpose requires a perfect and clean financial profile. This requirement may vary from lender to lender.

Some loan providers might not be willing to help someone who has a blemished credit profile. On the other hand, some lenders might be ready to offer debt consolidation loans for bad credit in the UK with no guarantor.

You can have the upper hand by getting these loans from a direct lender. Yes, these lenders can simplify the process and make it obligation-free for you. However, you must validate the upsides and downsides of having these loans.

This blog has elaborated on this, and you can take a tour of it right now.

The benefits and drawbacks of debt consolidation loans

You must have shortlisted these loans so far as you are here to verify their pros and cons. This way, you can reflect on the positive and negative sides of this financing option. You should not consider having them just because they are meant to serve the purpose.

It could be a mistake as you might have to bear heavy charges. This is because you might have taken out a random amount without knowing its pros and cons.

For example,

You manage a combination of debts, including a credit card balance of £ 14000. Now, you can check how working with a debt consolidation loan can be a game-changer.

Without debt consolidation loan	With a debt consolidation loan
Individual Interest rates 29% Monthly payments £ 747 Total amount you have to pay £ 17932	Consolidated interest rates 15% Monthly payments £ 679 Total amount you have to pay £ 16291

Advantages of debt consolidation loans

Debt consolidation is a process where more than one debt is clubbed together. Their greatest benefit is that you have to make a single payment. You will not have the headache of attending to each debt individual.

There are other avenues you can make the most out of these loans.

·       More organised approach

No need to manage debts separately. This provision allows you to combine various debts no matter what rates they carry. All you need to do is to let these loans cover the payments together.

Managing debts will no longer be chaotic. You can now put together debts and pay via a single provision. Besides, there is no chance of forgetting payments with these loans.

·       Credit improvement

Debts can be harmful to your credit scores. The meaning of carrying multiple debts at the same time could be a poor credit history. At this point, these loans can help you recover your credit status.

Payments will be completed on time, and this will impact your credit history positively. You can utilise these loans to upgrade your credit scores.

·       Online facility

If you take out these loans from private lenders, the application is going to be very smooth for you. Get these direct lender loans online without going to the bank branch. You can sit with your phone or laptop and prepare the loan application in the most convenient way.

Since you will be applying online, documentation will be least or minimal. Thus, it is going to be seamless experience for you.

·       Enjoy practical rates of interest

It does not matter if your credit scores are low. It would be good if it has improved to some extent over the time. Getting these loans on favourable rates is possible.

For instance, your total debt is £ 9000, and the combined APR is 25%. Your monthly payment will be £ 500. This means that within two years, you will have to pay £ 2500 in interest charges.

·       Downsize the overall monthly payments

Here, you will be combining the debts to pay through a single loan. Thus, the monthly payments get reduced because of this provision. Besides, these loans allow you to break the payment into small portions.

These will be most convenient to repay where your financial condition is bad because of excessive debts. You can choose the repayment pattern according to your financial stability. If you want, you can accept an arrangement that lets you pay in small amounts and not in full and at one time.

·       No collateral needed

These loans are unsecured funding solutions. You do not have to keep your assets at risk. Get an approved sum of loans without worrying about losing assets.

Your financial potential is crucial and based on it you can get approval. No matter what may have happened in the past. If your present financial condition is clean, you can expect getting acceptance from the lender.

·       Credit checks are soft

Bad credit is not going to be a big issue. This is because no hard credit assessment is performed. A soft analysis of your financial background to disclose affordability is done.

These checks leave no imprint on your credit profile. They are not visible to other loan providers. Thus, you need not have to be anxious about poor credit scores.

Disadvantages of debt consolidation loans

Loan is an obligation and it has to have some setbacks. As a borrower, you should not ignore such cons as it might affect your borrowing journey. You need to be mindful about the downsides.

·       Getting a low rate is not confirmed

With direct lenders, you cannot have the assurance of getting loans at a low rate. They never promise something like this. Rather, they always emphasise offering loans at practical rates.

You can make it to low rates with good credit scores and suitable financial conditions. However, it is not confirmed and totally depends on the lender who will be handling your request.

·       Heavy charges on delay

With direct lenders, you cannot have the assurance of getting loans at a low rate. They never promise something like this. Rather, they always emphasise offering loans at practical rates.

You can make it to low rates with good credit scores and suitable financial conditions. However, it is not confirmed and totally depends on the lender who will be handling your request.

The scariest of all is the compounding rates of interest. It can exaggerate the loan amount abruptly and make it unaffordable for you.

·       Affect the credit scores

Again, you must not take loan payments lightly. Getting these loans at the right time can prove to be beneficial for you. However, if you delay repayment, it will impact your credit scores.

It will go down and will affect your borrowing potential.

The bottom line

Validating the pros and cons should be crucial when you are interested in debt consolidation loans. This will give you a clear picture of how useful these loans could be.