Facing debt can be challenging for a lot of us, but there are a lot of new services on offer to help you gain control and shorten the time taken to pay it off.
Key Mortgages can go through the options available for individuals with debt and save you having to do the strenuous research.
Why might I need to consolidate debt?
A debt consolidation loan can be used to pay off multiple debts in one payment, reducing the total interest that you would be paying on those outstanding debts individually.
You might consider a debt consolidation loan in the following situations…
- To pay off an overdraft
- Medical bill debt
- Credit card debt
- Personal loan debt
What details or documents will I need to provide?
When you have an appointment scheduled with a lender, we recommend getting organised in advance and preparing the following…
- The address, phone number and email address of your employer
- The addresses you have lived at over the past three years
- Details of your monthly outgoings and income
- Details of your bank building or society account.
During the application process, the lender will complete a credit check, so giving your score and history a review will be beneficial.
What types of debt consolidation are available?
The type of debt consolidation loan you are offered will depend on your credit risk to the lender, this will either be a secured or unsecured loan.
A secured loan might be offered if you have a poor credit history, this will often involve securing an asset against the loan. An unsecured loan will not require you to do this.
If you choose to use your house as an asset, it is important to keep up with repayments to avoid the risk of losing it.
Questions & Answers
Depending on which method you choose, debt consolidation can either help or hurt your credit score. Introduced to lower debt, your credit utilization ratio can be reduced by consolidating debt which accounts for 30% of your overall credit score.
Lenders will have varying requirements for credit scores which is often in the 600+ range. You can regularly check and monitor your credit score online to see if you meet the minimum needed.
Like most financial services, it’s best to shop around for the best deal. You can use a loan comparison site to weigh up different lenders and what they can offer based on your situation.
Debt consolidation is not always the most suitable option, consolidating debts must be carefully considered. It will usually mean more interest over a longer repayment term and there may also be early repayment penalties on your current mortgage, you should think carefully before securing other debts against your home. There are other ways to manage debt such as free debt advice charities, you can find out more by contacting the Money Advice Service https://www.moneyadviceservice.org.uk/en/tools/debt-advice-locator these services may be more suitable for you.