Beware of Loan Applications on Finance Comparison Sites
If your considering an Debt Consolidation loan, the temptation on a financial comparison website is to always apply for the lowest APR debt consolidation loans. However if you don’t have a very good credit history, this could make it worse.
Such low interest rates are normally only for people with a good history of maintaining credit and loan repayments, not those with already high levels of debt to consolidate.
The hidden danger is that if you have a poor credit rating or have been refused debt consolidation in the past, you have a greater chance of having your loan declined. The lender will perform a credit search on you which leaves a footprint on your credit file. Every time you apply for credit, whether successfully or not, it is recorded by the credit reference agencies.
Multiple searches recorded against your name may affect your chances of obtaining credit in the future. This is a vicious circle that can be hard to break out from.
If you have been declined for a loan and are in need of debt consolidation to reduce outgoings and to simplify your finances, then call us for specialist advice.
Debt consolidation with Debt Management could save money over a Debt Consolidation Loan.
For instance a lender may be offering unsecured loans of £20,000 at £15.2% APR.
So to consolidate £20,000 into one loan over 10 years means paying back £325.12 per month for 120 months – a total of £39,014.86.
In other words – you’re paying back double what you currently owe.
On a debt management programme, the debt management company typically charge 17.625% of money paid as their fee. So it would cost:-
£20,000/120 months * ( 1/ (1 – 0.17625)) = approx £200 per month, £24,000 in total to pay back the £20,000 debt.
That makes a saving of about £15,000 by taking the debt management route.
Note: This presumes the creditors freeze all interest at the start of the debt management programme. Many will, but this is not something we can promise.