Should I Use A Personal Loan To Consolidate My Debts?
Posted by Tingyu
If you have several debts, using a personal loan to consolidate what you owe into one manageable monthly payment could be a convenient way to reduce the amount of interest you’re paying and help clear your debt faster.
We take a closer look to help you assess whether it’s the right choice for you.
How to consolidate debt with a personal loan?
Combining multiple types of debt – such as credit card and store card balances, loans, overdrafts, and payday loans – into a single monthly payment can make it easier to manage your finances and potentially save you a decent sum of money too.
One way to do this is to use a personal loan. The amount borrowed through the loan can be used to pay off your existing debts, and you’ll then repay your new lender in monthly instalments, ideally at a lower rate of interest.
This means you’ll only have one payment to make each month, rather than several, and only one lender to deal with.
What are personal loans?
Personal loans typically let you borrow between £1,000 and £15,000, although you can borrow up to £25,000 with some lenders. You’ll usually be able to repay this amount over one to five years, with some loans lasting a little longer.
Personal loans are unsecured, which means they are not secured against an asset such as your home.
Secured loans, on the other hand, are secured against your home which means if you default, the lender has the legal right to repossess your home.