In Bad Credit? How to Consolidate Your Loans
As we face the prospect of a double-dip recession, many of us are struggling with bad credit. Wherever we look, there seems to be somebody offering us a way out of our financial troubles, but how do we know which is the best solution?
It has been reported that Britain as a nation owes more than £1 trillion. So, if you’re one of the millions of people currently struggling to pay off mounting personal debts, follow our simple guide and you’ll be able to consolidate your loans:
1. Get a credit report/FICO score
When you took out your original loans, the lender would have checked your credit rating or FICO score. When you consolidate, you are again taking out a loan and so your credit rating will be checked. If you have a decent credit rating you have a much better chance of securing an affordable, lower rate on your repayments.
2. Consider the options
There are a range of options available to you. You need to consider which one is most suitable for your own debt – be it individual voluntary arrangement, debt management plan or debt consolidation. Whether you’re struggling with multiple repayments of other loans, looking to negotiate debts or want to pay a set amount each month, there’s a suitable solution for you.
3. Shop around
Once you’ve decided which type of plan you’ll be choosing, don’t just jump straight in to the first offer you receive. Like any financial service, there will be good deals and bad deals. It always pays to shop around as you can find the cheapest charges, most suitable repayment schedule or even substantially cut your total repayment.
4. Ensure you can afford it
When consolidating your loans, you need to consider the length of the repayment schedule against the amount payable each month. Can you make the payments? Is the length of the loan suitable to you? If the answer to both of these questions is yes, then the loan is more than likely a viable option.
5. Understand your loan agreement
There’s a reason that you’re consolidating your loans – so ensure that you read your contract fully. Make sure you ask the lender any questions and get them to clear up anything that you’re not 100% sure about. Remember, small print is there for a reason. Read it carefully and make sure there’s nothing in there that you don’t agree it – it could cost you if you don’t.
6. Sign the contract and control your spending
Find the right loan for you and take the weight off your shoulders. As soon as you’ve signed the contract, you’ll feel relieved that the debts you struggled with have now been removed. But, you must be prepared to adjust your spending in order to maintain your payments and successfully complete the loan agreement.
7. Debt repaid
Keep up all the payments on your loan. At the end of your loan consolidation, you are debt free. Congratulations!
Resource Box: Daniel Johnstone is a debt advisor who is currently researching debt consolidation
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