In which case Debt Consolidation Loan is Used3 min read

Needs for debt Consolidation Loans

If you are someone who is engaging with several debts with different monthly repayments terms and interest rates. And you are finding it hard to make repayment of these different debts depending on terms and financial feasibility. If you want to get rid off of complex and multiple repayments of debts you can choose a debt consolidation loan. When you will choose a debt consolidation loan your all debt will be in one basket. Then you have to pay only one monthly repayment which is of debt consolidation loans.

What Is Debt Consolidation Loan?

Debt Consolidation is summarizing of older debts into one pool and allows having one new loan with relatively lower interest rates. This allows you to make only one repayment instead of several repayments and complex structure Debt Consolidation loan offer you choice either lender will pay your old debts or give you a loan to pay off your old debts. By this arrangement, your old debt will be paid to be a new single loan. After that, you have to pay only for a single loan with a single periodic installment which will reduce the complexity.

How to Consolidate Debt here are the main Methods

Use 0% balance transfer credit cards

A balance transfer credit card allows you to transfer your debts and make repayments free of interest for a specific period. This is specific period is the promotional period offered by banks. In the UK Sainsbury bank offers the longest zero balance period which is 29 months with terms and conditions. You can view the zero balance period offered by different banks here and compare easily. This will give you detailed pictures of each bank offers related to zero balance.

Debt consolidation loans

As discussed above you can opt to take new loans from banks and pay old debts. After that, you will have only to repay only one loan in periodic and easy installments.

Second mortgage loan

You can take a loan against the home property to pay off your different debts. The amount of the loan is determined appraiser appointed by the bank. The amount of a second mortgage loan is usually 80% to 90% of appraised value. But the amount of loan also depends on the credit rating of the borrowers and not only on the appraised value.

When to Apply For Debt Consolidation Loan

  • where you are struggling with several debts with different interest rates being charged by lenders.
  • When you want to get rid of a number of debts burden.
  • If you want to reduce the cost of the loan by lower interest rates.
  • When you want more savings to achieve your financial goals by paying lower interest rates.
  • When you need to earn a good credit score you have to apply for debt consolidation. A credit score is playing a key role in deciding the interest on your loan. Higher credit score lower interest rate.
  • If you want to reduce repayments then actual then you would choose to go with debt consolidation.
    You can also view Sainsbury bank personal loan here.