Debt consolidation for secured and unsecured loans

What is debt consolidation?

If you’ve got a number of debts you may find it difficult to keep track of the repayments. If this is the case, you could consider taking out a new loan that merges these debts. This means that you’ll have one larger debt to pay instead of a few relatively smaller ones, which could make it easier for you to manage your debt. If you’re considering consolidating your debts, it’s important to note that you may be subject to a higher interest rate and penalties for early repayment on the accounts that you’ll be closing. The repayment term may also be longer, which may mean that you’ll have to pay more in total.

Which types of debts can be consolidated?

Debts that can be repaid early can typically be consolidated. These can include those on credit cards, loans, tax arrears, overdrafts, payday loans, utility bills that are overdue, as well as debt collection agency debt.

Secured and unsecured loans

Debt consolidation loans can be split into two types, secured and unsecured. Secured loans are borrowed against an asset, whereas unsecured loans are not.

What does it mean to use collateral to get a loan?

There are different types of credit available on the market. These include secured loans, where the money you borrow is tied to collateral. This means that the loan is tied to something valuable that you own, like your home. If you fail to meet repayments on the loan this could result in your possession being taken away from you to pay off the debt.

If I have bad credit am I able to consolidate unsecured loans?

This would depend on whether the lender thinks that you’ll be able to repay the new consolidated loan. Lenders typically look at factors like your credit history as well as other details that they have about you, such as your income, when making these decisions.

Further information

If you want to find out more about how to manage your debt, it might be useful for you to get further details about products like debt consolidation. You can get impartial information from services like the Money Advice Service and StepChange.

Categories

Related Articles