What are credit consolidation loans?

by Ceri Harris18.12.2013

Credit consolidation loans may offer you the chance to significantly reduce your monthly outgoings if you have commitments such as loans, credit cards etc. They may potentially be a very valuable tool in managing existing debt commitments that you feel are starting to get out of hand, too.

How do they work? Here are a few FAQs that we hope you find useful.

What is a credit consolidation loan?

It is a form of loan specifically designed to enable a borrower pay off multiple sources of debt, replacing them with a single loan and a single monthly repayment.

What are the advantages of that?

Typically, borrowing a single, slightly larger amount may prove to be rather lower cost (in terms of interest rates) then having several smaller loans.

Dealing with only one loan repayment each month, rather than several, may also make your monthly budgeting a little easier to control and administer.

Some of Willows Finance customers find consolidation loans a more attractive way to manage their debts compared to a debt management solution.

What types of loan can be paid off?

In principle, credit consolidation loans can be used to pay off just about anything. So, this may include existing loans, credit cards, car finance balances, store cards and so on.

Is it a good idea to pay off all other loans?

It is impossible to answer the question without knowing the details of your other loans and your financial circumstances.

However, if the interest rate of an individual loan is higher than the interest rates you may be able to obtain through credit consolidation loans, it may be advantageous to investigate this a little further.

You should be able to do this fairly easily:

  • by taking advantage of our service to get a loan quote; and then
  • doing some relatively simple mathematics to show how much you will be saving each month if you paid your other loans off.

What do I need to get this type of loan?

Different loan providers will have different lending criteria, however, there may well be a loan available that is suitable for your individual circumstances.

Even if you have some types of credit history problem on your records, through our service, it may still be possible to secure a loan for the purposes of credit consolidation.

How much can I borrow?

Once again, it is impossible to give a general answer to this question because so much will depend upon your personal financial circumstances.

Things such as:

  • your employment status;
  • your income;
  • your existing monthly outgoings;
  • your requirements for secured or unsecured lending;
  • whether you are a homeowner or renter;

may all influence a potential lender’s view of how much they are willing to advance. You can, however, benefit from our extensive experience of dealing with loan providers. This is because we will endeavour to match you with the provider who is most likely to offer you a suitable loan option.

Credit consolidation loans may not only offer the possibility to save you time and money, they may also offer you the opportunity to reduce your stress levels. Knowing you only have one loan and one loan provider to deal with, as opposed to many, may be a little more comforting.