A debt consolidation loan is a type of loan designed to reduce the amount of money that you spend servicing your debt and, in many cases, to pay back your debt quicker. They’re becoming a lot more popular not just because of the convenience that they offer to borrowers with complicated financial affairs but because, in a time where wages have been squeezed for 10 years, borrowers can make their money go much further than ever before.
Before you apply for a standard debt consolidation loan or a more specialist debt consolidation loan for bad credit applicants, what do you need to know? The Loan Broker team shares their top 5 tips for successful debt consolidation.
1. Understand how much money you’re spending each month paying down debt
You’re probably considering a debt consolidation loan because you have a strong feeling that the amount of money you’re repaying to loan companies, credit card companies, and on your bank overdraft fees is too high for comfort.
Don’t worry. You’re not alone. Many British borrowers, over time, open one new credit account every so often, and then, a few years later, understanding how much you owe and to whom you owe it becomes complicated.
Sit down in front of your computer and log into all the accounts you have for your loans, credit cards, store cards, and to your bank to check your overdraft. Write down how much each credit account is costing you every month. Your job is to try to find a debt consolidation deal now which costs you less than you’re spending on repayments now.
2. Get to grips with how you handle money each month on everything else
Now that you have all of your accounts open, it’s time to take a closer look at how you spend money because, in most cases, there are plenty of savings to be found.
Most families spend £100 or more a week on their grocery bills, normally at one of the big 4 traditional supermarkets. You should try a discount supermarket like Aldi or Lidl – if you’ve never been in one, you’ll be surprised by both the prices and the quality of food on offer. Many shoppers cut their shopping bills by around a quarter and, if you’re spending £100 a week, that’s nearly £1,300 you’ve saved.
Many of us love buying a big frothy latte from a well-known high street coffee chain in the morning and at lunchtime so we can get valuable energy and attention boost at work. You could save another £1,000 a year by taking your own coffee in a flask and even more by preparing packed lunches instead of going out to the local Greggs or fast-food outlet.
Always look for savings – try internet stores or going shopping when the retailers have big sales on. You can also save a fortune by changing your energy providers and your insurers each year by using one of the well-known price comparison sites.
A lot of what we do is routine but, by breaking those routines, you could receive the equivalent of a big pay rise by shopping smarter.
3. Put away your credit cards, for good
Now that you’re budgeting better and that you’re in the market for a debt consolidation loan, put away your credit cards, for good. Stash them somewhere around the house and try only to use them in emergencies. Once your debt consolidation loan has come through, you should cut them up so you can’t use them anymore.
4. Shop around for the best deal
How to get the best debt consolidation deal? Shop around – just like with everything else you buy because there are deals to be had out there. Loan Broker can help you and we’ll tell you how in just a moment.
Your debt consolidation loan should be for the total amount of debt you have across other loans, credit cards, store cards, and bank overdrafts. You already know how much you’re repaying each month for all of these credit facilities and the best outcome will be to reduce the amount of money you repay each month and to pay back, if possible, your credit facilities over a shorter space of time.
Remember that the longer you take out a debt consolidation loan, the more interest you’ll payback. However, in many cases and with the right deal, you may end up paying back less interest on a longer debt consolidation loan than you would pay back your debts the way that you’re paying them back now.
5. Now that you have your debt consolidation loan, keep to your monthly budget
Once the debt consolidation loan is paid into your bank account, make sure the first thing that you do is pay off all of the credit cards, store cards, loans, and overdraft payments that you took the loan out to settle.
Look at every opportunity you have to save money in your daily life and keep trying to find ways to enjoy the things you love and do the things you need to do for less.
Debt consolidation loans for bad credit applicants
As you can see, if done correctly, taking out a debt consolidation loan as part of a wider strategy to bring down your monthly costs can save you a significant amount of money each year. You’ll have a lot more money left at the end of the month and there’ll be an end date on which of all your debts will disappear. You’ll really have taken back financial control over your and your family’s destiny.
Loan Broker works with hundreds of borrowers each month to find them the very best debt consolidations loans for bad credit applicants. Although we don’t lend you the money ourselves, our close relationship with our lenders and our knowledge of who their ideal borrower means that we’ve got a great chance of finding the very cheapest deal on the market for you.
To start your application for a debt consolidation loan, please click here.