How to manage your debt with a loan

Want to manage your debt? Well, there’s an easy way to consolidate your debt into one manageable payment. Find out how below.

When you’re in debt, it can be one of the most stressful times in your life. The constant worry and pressure of juggling multiple payments and meeting monthly charges. However, debt is more common than you might expect. It can happen to everyone, at any point in someone’s life. Whether you’ve lost a job, taken out a loan or just going through a financial rough patch, debt can come at any time. However, there is a way to manage your multiple debt into a single payment.

More and more people are using debt consolidation loans, to merge any and all their outstanding debt, into one manageable payment plan. But, how do debt consolidation loans work? Whether you’ve got good or bad credit, there’s a loan option available to you, so you can better manage your debt. Guarantor loans are ideal for those with bad credit to borrow money for debt consolidation. We’ll be explaining everything you need to know about debt consolidation loans, how they work and how you can get one – despite your credit. This is your debt consolidation loan guide.

Handling debt

Before we discuss managing debt, first we should advise you to seek independent financial advice before taking out a loan – as taking a loan you can’t afford to repay can cause serious money problems. There are loads of places where you can seek advice about your debt, that will offer free and impartial advice about your individual financial situation. Institutes like the Debt Advice Foundation and StepChange Debt Charity, offer advice on managing debt and handling debt repayments.

Remember, before looking into borrowing money, you should seek independent financial advice. Now, let’s move on to debt consolidation loans.

What are debt consolidation loans?

The truth is, debt consolidation loans aren’t that different from any other loan. In fact, it’s just a specific term used for a personal loan. Personal loans can be used for almost anything, as long as it’s legal, which means you can use it to consolidate your debt. Personal loans are usually for smaller amounts (around £1,000 – £15,000 dependent on the provider), so if you have a larger debt, you could apply for enough to cover it all.

Personal loans vary from lender to lender, so it’s always important to look around before deciding on your loan. Which means, it’s essential to know exactly what your credit score is. The best rates for most loans will only be available for those with good credit, so checking your credit before you apply is vital.

Credit scores

There are many ways to check your credit score. Some services are free, and some will charge, however, by law, you are allowed to view a completely up to date credit report for a £2 fee. Your credit score is set by three main agencies.

  1. Equifax
  2. Experian
  3. Callcredit

Each of these different agencies judge credit score on different scales. Website like Clear Score, MSEs Credit Club and Noddle will provide you with a free credit report, so you can know your exact credit score before you apply for a debt consolidation loan.

Good and bad credit lending

No matter your credit situation there are lending options open to you. We’ll outline lending options for both good and bad credit, in detail, below. Personal loans, or debt consolidation loans, are available for those with both good and bad credit. We’ll start with good credit.

Good

If you’re in debt, and have missed repayments on your loans or bills, you are probably likely to have a credit score that isn’t great. So, it’s essential to check your credit score. The good news is for those with good credit, it’s a lot easier to borrow money at lower costs. Banks and high-street lenders judge their applicants solely on their credit score, meaning you could only be approved for a loan if you have a good credit score. However, how good your credit is also affects your interest rate. The higher your interest rate, the more you’ll end up paying back on top of your loan. Dependent on your credit and lender, the interest rate you’ll receive on your loan varies.

Average interest rate for Good Credit – 2% to 25%

Bad

If you’re unlucky enough to have bad credit, then it may seem like they aren’t many financial options open to you when it comes to borrowing money. Banks and high-street lenders will only approve you if you have a good credit score, therefore, you’re unlucky to get a loan through these types of lenders. Luckily, there are guarantor loans. These types of loans do not rely on your credit score. All you need for an application is a guarantor. Your guarantor signs to agree that should you be unable to meet monthly repayments on your loan, they will cover it for you. Guarantor loans have slightly higher interest rates than good credit loans, however. So, it’s a good option if you have bad credit, but if not, it’s advisable to look elsewhere.

Average interest rate for Bad Credit – 29% to 69.9% (dependent on amount and lender)

Both of these types of personal loans, can be used for debt consolidation. It’s an ideal way to manage multiple debt into one manageable payment. By focusing debt into one monthly repayment, you can manage debt a lot more easily, instead of struggling to meet more and more monthly repayments. Debt consolidation may not suit every financial situation; however, it can make managing debt a lot easier than multiple payments. Always seek independent financial advice before taking out a loan, and make sure you check your credit score. Dependent on your credit, you’ll be able to take out a debt consolidation loan. There are both good credit loans and bad credit guarantor loans, meaning whatever your credit, you could borrow enough money to consolidate your debt into one monthly payment.