“British households usually spend £900 more than their income” a report by Office for National Statistics states. The net shortfall is nearly £25bn; it is equal to quarter of NHS budget. The overspent money was arranged by borrowing. The rising figure poses a challenge for the British Govt. because the credit bubble has become larger than £ 200bn. According to economics experts, the squeezed household income because of benefit cuts, comparatively lower side wages, high inflation rate etc are forcing the common households to borrow frequently and more even to manage basic bills. The overall figures of personal debt in the UK show that the majority of households are feeling tough to manage living expenses; in most of the cases, not paying the dues on the time is creating bad credit history. A relatively new concept in lending industry titled as ‘no guarantor debt consolidation loans for bad credit’ is drawing wide scale attention of people having multiple loans.
What are Debt Consolidation Loans?
Debt consolidation lending facilitates the borrower to pay off multiple existing loan dues immediately. It is effective to repay several loans at one time. The multiple loans like student loan, personal loan, car repairing loan, credit card loan etc can be converted in to single loan. The borrower pays single installment instead of numbers of monthly installments at different dates. The monthly installment amount of consolidation loan is same for the entire period that may be of few months or years. Today debt consolidation loan, being provided by FCA registered direct lenders, has been accepted as the power to shred the net of multiple debts. This lending facility may be secured or unsecured. If you don’t have any asset the mortgage, go for unsecured consolidation borrowing. The guarantor loan for non-homeowner is also a good option but here you have to arrange a guarantor. Guarantor loans are provided at lower APR than that of unsecured loans.
Advantages of Debt Consolidation Loan for bad credit borrowers:
- High possibility of low interest rate based on credibility.
- A great convenience of paying a single fixed amount instalment each month instead of paying many instalments of a different amount.
- This facility is available for long -term also that reduces the pressure of paying large portion of income as monthly instalment.
- It helps you save big because you don’t have risk of facing multiple fees and penalties from different lenders.
- It saves time available keeps you relaxed; the repayment can be automated by directing the bank. It makes the whole affair risk free for you and lender both.
- When you pay all the instalments on time through automatic deduction, your credit score improves.
Disadvantages of Debt Consolidation Bad Credit Personal Loan:
- In case of debt consolidation personal loan secured by a guarantor, the entire risk rests on guarantor.
- Debt consolidation borrowing seems a big liability in absence of steady and regular monthly income.
- The credit score goes remarkably high if the borrower fails to repay on time.
- Debt consolidation borrowing and all the transactions made reflect on credit history and draw the attention of lenders in future.
Debt Consolidating Loan Became More Important in 2018:
In July 2018, the average debt per household was about £58,658. The numbers of households that borrowed high-cost short-term debts increased in 2017-2018 because of high inflammation rate and low wages. The figure went up while the unemployment rate came down in 2018. During January 2018 – June 2018, 18.3% high cost payday borrowers were first-time borrowers. The average credit card interest rate in the UK in July 2018 was estimated at 18.35%. The British household spends 34% of monthly income for renting. The British households owed £1.5955 trillion in July 2018; while, the total due amount was £1.5494 trillion a year before. The increased debt level per household denotes that the income is not sufficient to live without borrowing; and, the trend is expected to continue in 2019 also.
Debt consolidation loans for bad credit score borrowers are good. It is a great help if used with proper planning. Applying for new short-term loan at direct lenders has become a tendency to simplify the management of even the small funds requirements but it drives the person under heavy debt within few years because of high-interest rate and unmanageable instalments. If you too are the one feeling problem in managing multiple monthly loan instalments, think for debt consolidation loan.
In the worst situation of the bad credit score, winning the trust of the lending firms is difficult but very important at the same time. It is an irony in itself that you have the bad credit score because of late or no repayment of the loan, but improving the credit score is also possible by applying for another loan. These debt consolidation loans may prove to be the game changer for you. On the one side, you can manage the multiple debts without any difficulty and on the other hand, you can also enhance your credit profile by following the repayments on time. Ball is in your court now, so make the right decision and walk the right path.