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How Do They Work? What Is A Debt Consolidation Loan?
If you have multiple sources of debt which are giving you cause for concern, then debt consolidation may be a viable option for you. If you’d like to consolidate your personal loans or credit card debts and simplify your monthly repayments by using debt consolidation, here’s everything you need to know before you consider applying.
What is a Debt Consolidation Loan?
A debt consolidation loan is a type of credit which allows you to take debt from multiple sources and merge it into one, easy to manage source.
These types of loans come as both unsecured and secured loans, depending on your reliability and creditworthiness.
How do they work?
Debt consolidation loans allow you to borrow a lump sum to repay off your existing debts such as overdrafts, credit card bills and even personal loans. Once your multiple outstanding loan amounts have been settled, you’ll make just one monthly repayment to pay the costs of your debt consolidation loan.
What does 'representative APR' mean?
APR stands for ‘annual percentage rate’. It refers to the total cost of borrowing money over a year, including the interest and standard fees you have to pay. ‘Representative’ means that 51% of applicants will receive the same interest rate advertised or a lower amount.
For example, the representative rate Flexy Finance offers is 1013.30%. Therefore 51% of customers will receive that rate of interest or lower. It is not a guarantee that customers will receive the same representative APR in their loan agreement.
Not everyone within the 51% will receive the same rate as the APR that is advertised. You will likely receive a personal rate which may be different from other applicants.
A personal rate may be higher, lower, or the same as the representative APR. It is usually determined by your credit score, how much you want to borrow, and your finances. APR is often used as a comparison tool to help people compare different loan providers.
What should I do if I'm struggling with debt?
It is important to remember to not to borrow more than you can afford, so always borrow responsibly. These loans should not be used for long-standing financial debt or other issues. Remember, if you are struggling with debt please click on the links below:
Why You Should Consider Consolidation Should I Consolidate my Debts?
Many people believe that consolidating their debts into one payment is a lot more convenient than having to repay debt from multiple sources. However, debt consolidation isn’t always suitable for everyone. If you have less than desirable credit, you may find yourself paying a higher rate of interest albeit if it is from just one source.
Why Should I Consider Loan Consolidation?
When considering taking out a loan to cover debt consolidation, you should take the following into account:
- Interest rates and representative APR. This could be the deciding factor as to whether or not you can afford to borrow the amount you need for debt consolidation.
- Whether or not you can afford to repay the loan. Consider whether you can afford to borrow the amount to settle all of your debts.
- How long you’ll be repaying for. If you are looking to borrow a large sum, then consider how long you’ll be repaying for and how this could affect your finances in the future.
- If you are currently struggling to repay any existing loans that you have taken out, then you may struggle to repay a debt consolidation loan.
Will it Impact my Credit?
Once you have used your loan to settle your multiple sources of debt, then you will find that this has a positive impact on your credit.
However, should you fail to keep up with the monthly repayments on your debt consolidation loan, you may be issued a fine or charge which will negatively impact your credit history.
If you do make your repayments in full and on time, clearing the balance of the loan, then this will further boost your credit.
Are You Eligible? Am I Eligible to Consolidate my Loans?
'All of the lenders that we work with who offer debt consolidation loans will have different eligibility criteria which you will have to meet to be approved. However, these are the minimum requirements a lender will expect you to have:'
Am I Eligible?
- 18 years of age or older
- UK resident for the past three years
- In employment or with a reliable income
- With a valid UK bank account in your name
- Not in receipt of any County Court Judgements or bankruptcies
Can I get a Debt Consolidation Loan if I have bad credit?
Lenders will access your application by your ability to make repayments and evidence of how you have handled credit in the past. If you have struggled to make repayments on time, then this may cause a lender to feel dubious about your ability to make monthly repayments.
However, at Flexy Finance, all of the lenders that we work with, take into account the many reasons why an applicant may have bad credit, considering personal circumstances when they access credit applications.
If you do have poor credit and are still struggling to make repayments, then you may be offered a loan at a higher rate of interest. If you are struggling to make monthly payments, then consider seeking debt advice
How to apply How can I apply for debt consolidation loans?
Applying for debt consolidation loans with Flexy Finance is easy, thanks to our online application form. If your application is successful it will be matched with the right lender for your needs. The application is completely online and can be accessed using your mobile phone or your computer, whatever suits you best.
How to apply for a debt consolidation loan online.
Applying for a debt consolidation loan is something you need to think about before you commit. If you are struggling with multiple sources of debt, you can always contact Citizens Advice for confidential advice on money and debt. The expert advisers can try and help find a solution to your problem.
However, if you have made your decision, we’ve put together a helpful guide which explains the general process of applying for a debt consolidation loan. This guide may vary slightly from your application experience, but explains the main points.
Step 1 - Completing the online application
The online application is the first step in applying for a loan. The information you provide in the application is reviewed to determine whether you are eligible for opening a line of credit. For that reason, it is essential that you are 100% honest when filling out the application.
Within the application you will have to provide information on the following topics:
- The amount of money you want to borrow and for how long you will need to repay the loan.
- Personal and contact information
- Housing information
- Employment details
- Income details
- Typical monthly expenses
- Bank account details
Step 2 - Submitting your application and receiving an offer
When you submit your application it will be assessed and matched with one of the lenders that we work with. We match the application with a lender that we believe is right for the credit you want. Once the lender receives the application they will also undertake a review and offer you a loan.
Before you accept the offer, make sure that you read the terms and conditions. The last thing you need is unwanted surprises so ensure that you are entirely happy with the loan being offered. Therefore, carefully read through the terms and conditions and always ask a question if you’re unsure about a specific element of the offer.
If you decide that you don’t want the loan that is offered, you can always opt out before accepting. You cannot opt out of the loan after you have agreed and accepted the loan offer. So make sure to carefully think before applying.
If you accept the offer, you are bound to the terms and conditions.
Step 3 - Receiving your loan and monthly repayments
Receiving your loan
Having accepted the offer from the lender, you will then receive the loan amount that you have agreed directly into your bank account. The time it takes for the money to be transferred into your account will vary depending on the lender. It is best to ask your lender how long they think it will take for the transfer to take place, so that you can have peace of mind.
Making loan repayments
The repayment of the loan will be completed on a monthly basis, this includes the interest rate accrued. The terms of loan repayments would have been pre-agreed between you and the lender. So you should know how much you will need to pay each month and when the monthly repayment deadline is. If you are unsure, contact the lender so that you avoid missing any payments.
Advantages and Disadvantages Benefits & Drawbacks
As with any financial product, these loans aren’t suitable for all customers; therefore, you must understand both the advantages and disadvantages of consolidating debts before you proceed.
What are the Benefits?
- Take control of your debt. Settle your existing debts into one loan.
- Easier to manage. By consolidation your debts you, therefore, make it easier to manage, as you won’t have to worry about remembering repayment dates or amounts.
- Only pay one rate of interest. You could significantly reduce the amount of interest you have to repay.
- Positively impact your credit. By settling your multiple sources of debt and making your repayments in full and on time, you have the ability to improve your credit score.
What are the Drawbacks?
- If you have bad credit, you may not be able to borrow enough money to settle all of your existing debts.
- If you have poor credit, then you may have to repay a higher rate of interest.
- If you cannot afford the repayments, you may get yourself deeper into debt.
- You may have to pay Early Repayment Charge (ERC) if you wish to settle your debts early - which can be expensive.
Are There Any Alternatives?
- Personal loans. Taking out a personal loan could give you the opportunity to settle your debts.
- Repaying debts separately. You can also continue repaying your loans individually.
- Debt Management Plans. If you are struggling with your debts, then consider talking to your lender about setting up a Debt Management Plan (DMP).
- Balance transfers. Transfer the balance of your debts to a 0% interest credit card.
Why Choose Us Why Choose Flexy Finance for Debt Consolidation?
At Flexy Finance, we understand how difficult it can be to manage multiple sources of debt. Many customers struggle to remember repayment dates and the total amount repayable, however by consolidating those debts you could make your repayment process a lot easier.
Why Choose Us
We search our panel of over 30 different UK lenders to match you with the right debt consolidation company to meet your requirements. Apply with Flexy Finance today and receive your free, no-obligation quote on a personal debt consolidation loan today. We are a broker, not a lender and specialise in comparing options to help you consolidate your debts. We charge absolutely no fees for the service that we provide.
Can I trust Flexy Finance?
Yes, Flexy Finance is regulated by the FCA and is entered on the Financial Services Register under the reference number: 740571. ©Flexy Finance is a registered Trading name of Quiddi Hub Limited which is an Appointed Representative of QV Holdco Ltd.
QV Holdco Ltd is authorised and regulated by the Financial Conduct Authority, and is entered on the Financial Services Register under reference number: 672826.
Debt Consolidation Loans FAQs Frequently Asked Questions
If you still have questions about debt consolidation loans, check out the frequently asked questions below.
What is a debt consolidation loan?
A debt consolidation loan is a way to consolidate some or all of your debt into a single monthly payment. The debt consolidation loan centralises all of your sources of debt into one fixed monthly payment, which can make the debt repayment process more manageable.
How can I get a debt consolidation loan?
You can get a debt consolidation loan by applying online. You will be required to input personal information and contact details, including some financial information to ensure you’re eligible for a loan. If you are accepted, a broker will be in contact to discuss the terms of your loan.
Why choose Flexy Finance for a debt consolidation loan?
Flexy Finance understands that juggling multiple sources of debt can be stressful. That’s why we work with a panel of regulated UK lenders who are dedicated to finding the right debt consolidation loan for you. Our online application is quick and easy, and we charge no fees for our service.
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