Debt consolidation loans are still available

25 August 2009

Most of us already know that finding a loan is more difficult than it has been in the past, and that includes debt consolidation loans.

Lenders have become more cautious about offering loans than in recent years, and this is one reason they have tightened their lending criteria.

However, it is still very much possible to get a debt consolidation loan - it may just take a little longer to find the right deal. Speaking with a professional loans adviser can make things a lot easier.

Explaining debt consolidation

A debt consolidation loan is a new loan big enough to pay off your existing debts, meaning you will only have one (larger) debt to repay, instead of many smaller ones. This can make your finances much easier to manage and keep track of.

As well as consolidating your debts, a debt consolidation loan can also enable you to reduce your monthly payments, by extending the amount of time you`ll take to repay your debt. This can be a big boost to your finances, but keep in mind that you may pay more interest than if you had repaid the loan over a shorter period.

That said, it is sometimes possible to save money overall if you are consolidating debts that had a higher interest rate than your new loan. But if you choose to repay the debt over a longer period of time, the additional interest you`ll pay in that time could cancel out any savings.

For many people who consolidate their debts, though, the reduced monthly payment is more important - even if it does mean paying more in the long term.

Finding a debt consolidation loan

If you`re looking for a debt consolidation loan, it`s important that you search around for the best deal for your circumstances. One of the best ways of doing that is by speaking to a professional loans adviser, who can look for a deal on your behalf.

Remember that lenders are still cautious about offering loans, and if you have a poor - or even an average - credit rating, you may be less likely to be offered a loan with a low interest rate than you would if you had a perfect credit rating.

Not all lenders currently offer loans to people with poor credit ratings, so don`t be too disheartened if you`re not offered the first deal you apply for. Just remember that each application you make will be recorded on your credit history, and this could affect future applications. In other words, it`s best to talk to a loan provider who specialises in helping people with your kind of credit history.

You should also be completely certain that you will be able to afford your new debt consolidation loan repayments before you apply. If you end up missing any payments, you could face action from your lender, and your credit rating will be affected.

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