Debt consolidation FAQs
If you’ve got any questions about how debt consolidation works to repay your unsecured debts, we’ll take you through the most commonly asked here. Our debt consolidation FAQs should help you make up your mind whether it’s right for you.
Debt consolidation is a form of credit used to pay off existing loans and credit cards. If you have a change in circumstances while you’re repaying it, you’ll have to speak to the lender.
The lender might let you extend the length of your debt consolidation loan to make your repayments more manageable. But if you do this, you might have to pay more in interest and it will take you longer to clear your debts.
If you have a secured debt consolidation loan, you could be at risk of losing your home if you don’t keep up with the repayments. That’s why it’s really important to make sure that you can afford a secured debt consolidation before you take it out.
Debt consolidation costs vary from lender to lender. You might have a fee for consolidating your debts and you’ll usually have to pay interest on your repayments.
If you’re considering a debt consolidation loan, it’s a good idea to shop around to get the best deal. You should also check if the application offers a quick check ‘soft search’. This doesn’t leave a mark on your credit history so you can see if you’ll be accepted before you apply.
Debt consolidation is a type of credit that pays off your existing debts. Because of this, it won’t have the negative effects on your credit history associated with other debt solutions.
As long as you keep up with your repayments, debt consolidation won’t have a negative effect on your credit rating. But if you miss any payments, this will show on your credit record and could affect your ability to be able to borrow in the future.
There’s no fixed length to a debt consolidation loan. It depends how much debt you have and how much you can afford to repay every month.
If you’re making your repayments more affordable, this is likely to mean that you’ll be repaying what you owe for a longer period. And if this is the case, you might end paying back more in interest over the term of the loan.
Whether you can repay your debt consolidation loan early will depend on your lender’s rules. You can’t repay most loans early – you’ll usually have to stick to the agreed term.
If you do want to pay off your debt consolidation loan early, you’ll usually have to pay an early resettlement fee. This might mean that the debt consolidation will end up costing you more, and you might lose out on any savings in interest you’d make.
One option if you’re looking at debt consolidation you can repay early is a balance transfer credit card. Please be aware that there can be high interest rates on these cards though, particularly if you have had problems borrowing in the past.