unsecured Debt consolidation Loans explained
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Unsecured Loans
What is an unsecured loan?
An unsecured loan is a loan given by a lender to a person. Being unsecured means that it is not secured to a property or vehicle. This means that the lender has less security if you fail to make payments.
What is an example of an unsecured loan?
An unsecured loan would be one given by a bank, a building society or another company, at a fixed interest rate, over a set period of time. It is normally short term, usually less than five years, but could be up to ten. The lender does not require any other form of what some people call collateral or security, to protect them in case that loan doesn't repay.
How do I get an unsecured loan?
You can apply to a bank, building society, or a lending company, you would normally have to go through some kind of written or online application process, and submit that to the company. They should then come back to you with a quote which may be verbal but followed up by written documentation.
What are the benefits of an unsecured loan?
Unsecured lending is normally quick and flexible. It's quicker to arrange than any other type of loan and also it then allows you to spend it where necessary. This may be a car, holiday, or something else, so you can to enjoy the benefits sooner.
What are the drawbacks of an unsecured loan?
With an unsecured loan, when you borrow any money, it brings with it obligations, the obligation to meet the repayments. If you have problems meeting that repayment then you need to deal with that appropriately and quickly.
What are the risks of an unsecured loan?
The main risk in an unsecured loan is if you have problems meeting the repayments. This can lead to problems with your credit history, and that will be logged through some form of a debt recording agency. If you fail to repay the loan in the time agreed you could end up with county court judgments (CCJ's) against your name, which also damages your credit history.
How does borrowing on a credit card work?
When you initially apply for a credit card, the credit card company will make an assessment of your credit risk and give you a spending limit, a credit limit on the card. That then gives you the capacity to spend or borrow up to that limit at any moment in time. Your obligation is to meet the minimum repayment on that card or repay the balance in full. The thing you have to remember when you borrow on a credit card is the interest rate you are paying on that card can be quite high. If you only meet the minimum repayments you will then be charged significant amounts of interest. Also, if you fail to meet the minimum repayment on that loan then you may have further problems if the fees you are charged on top are expensive.
What are the benefits of getting a loan via a credit card?
The main benefits of a credit card loan are that you will have flexibility. The credit limit is what's called revolving - so that as you spend on it and repay, the limit is always available to you - and that is the main benefit. It is also there to cover impulse purchases so you don't have to go back and ask for more money any time you want to do it, and you have total discretion as to what you spend that money on.
What are the drawbacks of getting a loan via a credit card?
The drawbacks of loans on credit cards are that many customers find it difficult to live with a discipline of repaying. There has been much criticism of the fact that a revolving credit facility and the loans to do the repayments get people into debt. Therefore, with using a credit card for purchases, it's important that people are disciplined in their repayments.
What is a personal loan?
A personal loan is where you make a loan application to a lender on a personal basis, normally for personal expenditure. It is exactly the same as an unsecured loan and the two names are virtually interchangeable within the United Kingdom.
What are the benefits of getting a personal loan?
The benefits of a personal loan are mainly around budgeting, and also for fixing an amount of money. Normally, you can fix both the amount of money you want to borrow, and the term you wish to pay it over. The amount of money that you've got to repay over that period of time helps with budgeting.
What are the drawbacks of getting a personal loan?
The drawbacks of a personal loan mainly revolve around problems with repaying. If you can't meet the monthly repayments, or you have difficulty in meeting the final payment and do not repay the loan, then you can end up with adverse credit history, or you can end up in court with a county court judgment (CCJ).
What is a bank overdraft?
Individuals can ask their bank on current accounts if they can have an overdraft facility. That is an allowance for the individual to withdraw money or write cheques on their account and take their account into agreed overdraft. The bank may charge an arrangement fee or interest, and therefore the bank takes the risks that normally run with borrowing money.
What are the benefits of getting a loan via a bank overdraft?
Overdrafts are normally provided in the UK on a revolving basis, although some can be for a fixed term. The benefit is that these are very flexible and can be used easily by customers, in that they're linked to their bank account. Therefore you can get the money very easily via either a cheque or card through a cash machine. The interest rates tend to be reasonable and the fees for arranging it are normally not as expensive as other types of borrowing.
What are the drawbacks of getting a loan via a bank overdraft?
In the same way as any borrowing, there are risks if you have trouble meeting the payments or repaying that overdraft. If you get into financial difficulties, the bank may withdraw that facility. That might lead to issues including being taken to court, or court judgments levied against you. The other drawbacks are, it's hard to budget and maintain the discipline of repaying that overdraft. What many people end up doing is taking the overdraft and consolidating that debt onto a loan, and therefore finding a more structured way of repaying it.
Don't Worry About Your Debts...
"A unsecured debt consolidation loan can be life changing. It can give you the chance to get your life back on track and to stop worrying about your creditors chasing you for payment."
"Our debt advisors have dealt with all sorts of situations so please don't be worried about talking to them about your debts."
Do I Qualify for a consolidation loan?
Not everyone will qualify for a debt management program but a good place to start is by answering the following quick questions.
- Are you a UK resident? (you do not have to be a homeowner)
- Do you have more than two debts amounting to at least £500?
- Have you checked the criteria to make sure that you don't qualify for debt management rather than an unsecured debt consolidation loan?
- Do you want to speak to an advisor who can help you consolidate your debts into one easy loan payment?
If you answered YES to the questions above then go ahead and wipe out your debt today. Fill in the simple form opposite, a friendly and experienced advisor will contact you at a time to suit you and discuss a solution to your debt problem.
Don't think you qualify?
- Are you a UK homeowner with debts? Click here.
- Are you a UK homeowner owing more than 2 creditors, struggling to pay your debts each month? You may benefit from debt management instead of a debt consolidation loan. Click here.
If you couldn't answer YES to the questions, then all is not lost. Simply click on the link that best describes your residential status and we'll show you another solution.