Consolidation Loans: Merge your Outstanding Amount Into One Manageable Loan

by Eric - Date: 2007-02-13 - Word Count: 328 Share This!

The loan market provides funding solutions for almost every situation. This article tries to clarify some of the salient points of a consolidation loan.

In a world where every four out of ten people are facing financial crunches, debt problems have become a dilemma that is threatening the British economy. Consolidation loans are fast becoming an effective debt management tool for the UK residents.

Consolidation loans can be segregated into secured or unsecured consolidation loans, as well as bad credit consolidation loans. Instead of paying a number of creditors, consolidation loans roll all the outstanding payments into one convenient loan. Therefore, the borrower only has to pay the lender a monthly instalment and the lender in turn takes care to pay the other creditors.

In case you have a bad credit history, then also you can avail a consolidation loan. Before applying for a loan, it is important to check your credit score. In case of discrepancies, consumers can approach credit bureaus, such as Equifax and Experian. The table below illustrates the credit ratings:

Poor credit score- 350-619

Fair credit score- 620-659

Good credit score- 660-749

Excellent credit score- 750-850

Your credit ratings determine your interest rate. If the debtor declares bankruptcy, creditors will not be able to recover any money. Thus, Consolidation loans works in everyone's favour. This loan type is allotted low interest rates for fast disposal of debt. But consumers with adverse credit ratings may have to pay more interest than others.

If you are above 18 years of age and can afford to pledge collateral against your property, then you can apply for secured consolidation loan. The presence of collateral reduces the risk factor for the lender. You can bargain with the financial provider for competitive interest rates. Before signing on the final agreement, do a market research of your loan product. Find out the going annual percentage rates (APRs). The fierce competition among the lenders has resulted in fringe benefits like repayment holidays and no prepayment penalties.

Related Tags: credit card, consolidation loan, personal loan, unsecured loan, debt consolidation loan, unsecured consolidation loan, unsecured bad credit loan, poor credit debt consolidation loans, personal debt loan, low cost consolidation loan

The author is business writer specializing in finance and credit products and has written authoritative articles on the finance industry. He has done his masters in Business Administration and is currently assisting Longdog Finance, as a finance specialist.

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