Living in debt can be one of the more stressful circumstances in life. . For those who find themselves juggling multiple repayments each month, a debt consolidation loan may be a realistic option to reduce stress levels and make daily budgeting more straightforward – but how does such a consolidation loan actually work?
A consolidation loan provides a cash sum which can be used to pay off any or all of your existing debts immediately, be it credit cards, store cards, or overdrafts. Once you have used this loan to clear debts, you will then only have to concern yourself with paying off your consolidation loan amount every month, and managing your finances so as not to take on any additional large debt. This means just one fixed repayment a month instead of multiple transactions.
The biggest advantages of a consolidation loan
One of the most stressful aspects of managing debt is keeping track of exactly how much is due to each creditor every month and ensuring you have the money ready by various due dates. Consolidating your debt with a loan makes household budgeting instantly easier. You will always know exactly how much is due each month and on what day your own repayment will be taken.
A consolidation loan should also work out cheaper. Often those in debt are only paying their minimum payment each month, which may mean just paying the interest element of the total due. As well, credit cards can charge quite high interest rates, whereas consolidation loan lenders can offer lower rates of interest, thus reducing overall interest costs.
Then there is the positive impact consolidating your debts will have on your credit score. If you are able to pay back your loan promptly each month, this will be seen as a positive on your rating.
How do I apply for a debt consolidation loan?
Applying for a loan is easier than ever and there’s no need to even step foot into a bank. Online peer-to-peer lenders such as the lenders of Zopa make funds accessible for any borrower who fits the application criteria. A loan application can be made online with a personalised quote that will not affect your credit score, within just 24 hours a decision can be made by their team of underwriters. You don’t have to step into a bank to deal with real people. Should your application be successful, a loan of £5,000 to £10,000 could be transferred to your bank account via BACS within 3 working days.
The criteria that you will need to meet is likely to include: proof of identity, 3+ years at a UK address, a good track record of debt repayment, a visible credit history and an income that allows you to afford your loan.
To make managing your debt more straightforward, consider peer-to-peer debt consolidation with a Zopa loan today.