Consolidate With Bad Credit


Got bad credit? By consolidating all your loans into one, it could save you money, as well as provide you with several other benefits. This article will first outline the main money saving concept, and then the extra benefits.

The principal behind consolidation being such a powerful tool is time. In general, the longer a period you borrow money over, the lower the interest rate tends to be on your loan. Take your mortgage for example, which is often below 5% APR and which you will usually payoff over 20 years or more. Compare this to a small personal loan of £5000, which is usually around 8-9% APR and which you will pay back over a period of up to 5 years. So theoretically you can take out one big loan, over a longer term and at a lower APR, and pay off the shorter term smaller loans with it. This would leave you with the same amount of money to pay, but at a lower rate.

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However it does come with one caveat - the longer you pay the money back over, the more you pay back in interest. The idea is to find the sweet spot, where you pay the same amount back overall, but have lower monthly repayments. Or the reverse if you want to pay the same amount monthly, but pay less back overall. Whichever aim you have, consolidation can help you do this, not always, but it is definitely worth checking.

Other benefits of bad credit consolidation include simpler budgeting, with only one payment coming out of your bank account each month it makes planning easier, and there is less chance of a shock if you have forgot about a loan payment. It can improve your credit rating, as you will have fewer records on your credit file. You can also take advantage if you have a partner, as you can use their income to help you borrow more money. If you take out a secured loan you can borrow up to £100,000.

To find out if loan consolidation can work for you, you need to get some quotes from a lender or two. First, go to a whole of market loan broker for one quote. They must be whole of market, otherwise they will just have access to a select panel of lenders, and you will get access to fewer quotes. Next, find out which lenders do not use brokers, and get a quote from these. Now you have the figures to compare whether loan consolidation will be worthwhile.

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