Loans for Debt Consolidation

What are debt consolidation loans?

A debt consolidation loan is a type of borrowing typically used to bring your finances under control, manage your debts and make monthly repayments a little less overwhelming.

If you’re making multiple monthly payments for credit cards or loans, consolidating these debts with the right plan can mean you only pay one lender a fixed rate each month until the loan term ends.

If you’re thinking of combining multiple monthly payments for credit cards or looking at consolidating home loans, a consolidation loan with the right plan can mean you only pay one lender a fixed rate each month until the loan term ends.

Types of debt consolidation loans

When it comes to consolidating home loans and loans in general, there are two main types to consider – secured and unsecured.

With a secured loan, the amount you want to borrow will be secured against an asset such as your home. This often means more favourable borrowing terms, however missed repayments could result in you losing your home. Secured loans are a more suitable loan type to consolidate debt with poor credit as it is less risky for the lender.

Unsecured consolidation loans require no asset to secure against. While this often results in higher interest rates, it means you will not have your home or other asset repossessed if you fail to meet repayments. This is the best loan for debt consolidation if you have a good credit score.

Benefits of debt consolidation loans

Consolidating debt into one loan can help you avoid juggling several individual repayments with multiple lenders. In some instances, combining all debts into one payment can also mean you pay less than with multiple short-term loans. This is because there are sometimes more options, and better rates, for low interest debt consolidation than other types of financial borrowing.

Additionally, regular repayments of a consolidation loan could improve your credit score over time. This will help you access better rates for financial borrowing, such as applications for mortgages and credit cards.

Disadvantages of consolidating debt with a loan

In some cases, debt consolidation might not reduce your repayments, as it depends on how much you are currently repaying and over what period. This type of loan isn’t designed to erase your debts entirely, so think of it as a new payment plan rather than a form of debt relief or settlement.

If you’re trying to find a loan to consolidate debt with poor credit, the best loan type could be a secured loan. Remember that securing your loan against property, such as your home, could mean losing it if you default on loan repayments.

With an unsecured consolidation loan, it’s still a form of debt. This means you will receive penalties if you do not make payments on time. This will also negatively impact your credit score over time.

How to consolidate loans

The process for consolidating existing loans will be similar, no matter the type of loan. Fully understanding your debts before you apply can help us determine your eligibility for certain deals.

1. Add up your total existing debts and use our loan calculator for debt consolidation to see how much you could expect your monthly repayments to be.
2. Begin your application by getting in touch with us online or over the phone. Please have further information to hand, such as outstanding debt totals and loan terms, previous addresses, personal financial account details, monthly income and outgoings, as well as your employment status.
3. We’ll help you find the best loan for debt consolidation and explain the repayment terms.
4. Begin to pay off your consolidated debts. If your application is successful, you will have consolidated all debts into one payment and can begin making monthly repayments.

What can I use debt consolidation for?

Consolidation loans are a way to combine all debts into one payment. This makes it easier to manage and oversee your debts while taking positive steps towards improving your financial circumstances. You can usually consolidate all types of debt, such as:

• Personal loans
• Credit card debts
• Payday loans
• Bills
• Debts from store cards
• Loans for emergency home or car repairs

By consolidating home loans and other personal loans, you could lower the overall interest rate from the individual loans. This should make it easier to pay off your debts faster.

Is a debt consolidation loan a good idea for me?

Whether a consolidation loan is right for you depends on your individual circumstances. Taking out a loan to consolidate debt can make financial management easier.

If you have County Court Judgements (CCJs) or poor credit, our loan experts will search the market to see which loans are most suitable for your situation.

Our guide can help you find out more about being eligible for a loan.

Can you get a consolidation loan with bad credit?

If you have a poor credit score, it can be difficult to access competitive deals for financial borrowing. You may also find it challenging to access the credit limit you require. This is because lenders see you as a risky option.

When searching for consolidation loans with bad credit, a secured loan could raise your chances of a successful application. With secured loans a home, or a property you own, is used as ‘security’. Think carefully about this option – if you fail to make repayments, your home or car could be repossessed.

Unsecured consolidation loans are still a possibility if you have poor credit. However, it could be difficult to find the credit limit and interest rates that suit your financial circumstance.

Before you apply…

There are a few ways you can prepare before you apply to give yourself the best chance of being approved. This can include:

1. Assessing the cost of repayments

Calculate how much you’re currently paying monthly and ensure the amount matches with the new repayment structure of your consolidated loan amount. This can help you decide whether combining your credit into a single debt consolidation loan repayment is a good idea for you.

2. Checking details on your income and outgoings

It will help lenders if you give them full details on your income and monthly outgoings, as they will always need this information.

When making your application, it’s especially helpful to share information about your other debts, so they can be sure you can comfortably make repayments on a new loan agreement.

3. Looking up your credit history

Familiarise yourself with your credit report so you can give lenders all the information they need and answer any queries. Lenders tend to run a credit check as part of your loan application, so they can see your borrowing history as well as any CCJs or other debts. Doing this can be helpful to manage expectations before applying for loans to pay off debt with bad credit.

‍

Representative example

SECURED LOANS - Rates start at 6.59% variable. We also have a range of plans with rates up to 36.6%, giving us the flexibility to help you find a loan that suits your needs.

Representative example: if you borrow £34,480 over 10 years, initially on a fixed rate for 5 years at 7.60% and for the remaining 5 years on the lenders standard variable rate of 8.10%, you will make 60 monthly payments of £467.50 and 60 monthly payments of £473.06.

The total repayable would be £56,528.60 ( This includes a lender fee of £595 and a broker fee of £4137) The overall cost for comparison is 11.3% APRC representative.

The maximum APR is 36.6%.

‍

What do I need to apply?

When you start an application online, our team will be in touch over the phone to talk through a few details. We’ll ask for further information about you, such as:

• Personal financial details
• Employment status
• Details of your income

We may also discuss your current situation and the existing debts you have. This helps us search the market for the best loan for you and check your debt consolidation loans eligibility.

Before you start, it’s best to make sure you have details on any outstanding amounts to hand, along with your current loan terms, monthly payments, and interest rates. By providing this information you’ll help us to better understand your situation. We can assess your debt consolidation loan eligibility and see if we can help simplify your finances by offering a loan that would lower your monthly repayment amount.

Use our debt consolidation loan calculator to help you determine what kind of monthly repayments you might expect to make.

FAQs

Who qualifies for a debt consolidation loan?

You will qualify for a debt consolidation loan if you are approved for a new loan of an amount that enables you to pay back at least two existing debts. Debt consolidation loan eligibility is assessed in a new credit application and will be accepted based on your credit score and circumstances.

Can I pay off a debt consolidation loan early?

As with most loans, it is sometimes possible to repay the amount in full ahead of time. However, it’s important to remember that this may incur an Early Repayment Fee. This amount usually varies from lender to lender. Always check the terms of your loan before you apply.

Can I take a break from paying back my debt consolidation loan?

If you think you might need a break from repayments at any point, you should check the terms before applying. While some lenders do offer ‘payment holidays’ on loans for debt consolidation, these can show up as a negative on your credit report.

Also, be aware that if credit is repaid by a consolidation loan over a longer term, the amount repayable may be higher.

Do debt consolidation loans hurt your credit score?

Applying for any form of credit could mean a temporary decrease in your credit score, especially where multiple searches have been placed on your credit file.

However, taking out a debt consolidation loan in particular doesn’t negatively impact your overall credit score. In fact, over time it could act as a boost as you make repayments and prove your reliability as a borrower.

Just make sure to keep on top of making payments regularly. If you're concerned about any negative implications, it's important to seek advice from one of our experts beforehand.

What are unsecured debt consolidation loans?

Unlike a secured loan, an unsecured debt consolidation loan (also known as a personal loan) isn’t linked to any property you hold. That means, if you fall behind in payments, a lender won’t be able to take ownership of your property.

Debt consolidation without the risk of losing your property may instead be subject to higher rates.

Questions about our loans

We can give you the tools you need to better manage your financial situation, by offering a simple and flexible loan process. Our team can assist you in every way possible to ensure you get the repayment terms and interest rates that are best for you.

Once we’ve received your application, we’ll make an ‘in principle’ decision within 24 hours. We can also make direct payments around 14 days after your application has been approved.

• How much can I borrow?
  You can borrow anything from £3,000 to £500,000 when you choose Norton Finance and our trusted network of lenders.
• How long are the repayment terms?
  Repayment terms vary between one and 30 years. They usually depend on your personal circumstances, including how much you borrow and the amount you can comfortably afford to pay back each month.
• What are the interest rates?
  The interest rate you’re offered will depend on your individual money management history and current credit score. If you’re a homeowner, our secured loan rates start at 6.59%.
• Are there any loan fees?
  We may charge a broker fee of up to 12.5% on all secured debt consolidation loans, capped at £3,995. We don’t charge fees on unsecured debt consolidation loans, as we receive a commission from the lender.

From credit scores to debt management – find out more with Norton’s Know How section.