These days, it is no longer surprising to find out that most people have accumulated a lot of debt in their name. These debts could simply start off with simple credit card bills that pile up each and every swipe, especially if you have a spending limit that is greater than how much you actually earn in a month. Then add a car loan on top of that, leaving you with monthly repayments that last of up to five long years. How much more if also have an existing mortgage on your home, how else do you expect to pay off all of your debts each month if you also add your monthly expenses on top of your total debts? It would be a tough decision to make on how you would split your money to pay off loans, debts, and expenses. Sometimes, you might even have to resort to not paying for one over the other, just so you could try to beat the interest rate. But it could actually be a whole lot easier than those migraine inducing decision making. You could actually apply for a debt consolidation loan so that you would not have a hard time paying all of your debts each month.
How Does It Work
With debt consolidation loans, you would apply only for a single loan amounting to the total amount of debt that you need to pay off. For example, if you have an outstanding credit card bill of £850, a total car loan balance of £5,850 and a mortgage you still need to pay off amounting to £3,300, you could apply for a loan amounting to £10,000. And that goes without saying that you would still be able to apply for the loan, even if you do have debts in your name, or even if you have a bad credit score rating. Even in your current financial position, you would already be able to pay off all of your existing debts, without having to worry about interest rates bloating up, or having additional late payment fees that add up to your monthly expenses.
How to Pay it Off
The great thing about a debt consolidation loan is that it would downstream your monthly payments to a single loan repayment rather than multiple payments to each of your debts, loans and bills. Continuing with the £10,000 loan example, you either have the option to pay for it within only 48 months or as long as 54 or 60 months if you need to stretch it out for a longer period of time, and cheaper monthly repayments. With a 48 period repayment, you would have to pay roughly £385 per month, already including the 39.9% representative APR. If you want a smaller monthly repayment, you could opt for 54 months and pay £365 per month or 60 months and pay £349 monthly. But you have to note that the longer you pay, the higher your total repayable would be ranging from £18,440, £19,670 and a whopping doubled £20,940 per loan period scheme.
How to Apply with Bad Credit
You could still apply for the loan even if you have bad credit, and no matter how much debt is in your name. All you have to do is to apply with a trusted friend, family member, or colleague as your guarantor. What this simply means is that in the event that you would not be able to pay off your repayment for a given month, your guarantor should be ready to pay for it in your behalf. You guarantors credit score standing would also be the basis of whether your loan application would be accepted or rejected. If you would also like to loan for larger amounts more than £10,000, you would need to get a guarantor who is also a homeowner so that you could get easily approved.
How to Improve Credit Score
You can also improve your credit score if you apply for a debt consolidation loan. Since all of your debts and loans have already been paid up, it would be a great step in drastically improving your credit score rating. It would be a whole lot easier to pay it off each month because you would only have one payment to make. You would not need to miss out on payments because your monthly payment would be more affordable compared to paying off multiple loans and debts on top of your monthly expenses. Another benefit for you as well is that you also never have to worry about missing your monthly repayments, because that is what your guarantor is for. What will happen then if your guarantor would make your payments for you is that it would already be an internal agreement between you and him or her regarding how you would pay off your debt back.