Online Debt Consolidation Loans In The UK

Or maybe you've seen the commerical with former cricketer Phil Tufnell selling you on the benefits of trading in multiple payments to creditors for a single consolidated loan -- at a low interest rate, as well.

It is tempting, isn't it? A single -- lower! -- monthly payment on your debts. What they don't tell you, of course, is that the monthly repayment may well be smaller and easier to pay but it will last for a far longer period of time. These payments may be spread over 25 years and the actual amount to be repaid can be far more than normal interest on normal loans, mortgages or credit card payments. This can be a major disadvantage.

If you belong to one of the following groups, you might already be considering such a loan:

• low income
• fixed income
• income from social security benefits
• history of bad debts or bad credit
• history of County Court Claims and Judgements
• self employed
• retired

You might be considering a loan amounts of £5,000 to £10,000 or £20,000 and even up to £50,000 or £100,000. It can be tempting to borrow a bit more, perhaps for a holiday or fitted kitchen or carpets. But this can keep you in debt for longer and the temptation should be avoided. It is best to borrow the minimum on loans.

There are two types of debt consolidated loans:

• Unsecured Loan
• Secured Loan

If you own little or no real property, an unsecured loan is ideal. Of course, an unsecured loan does have a higher interest rate because these loans are more risky -- the company loaning the money cannot seize or reposess any property if you default.

A secured loan is backed by property you own and so is considered less risky for the bank. A secured loan is normally tied to an asset such as a house, flat, bungalow or other building. Before you can get such a loan, your assets needs to be checked for proof of ownership, condition and valuation. Therefore a loan of this sort takes longer to obtain. The upside is that the interest rate will be lower.

Online Loans

There are plenty of cheap consolidation loan available in the UK. You can usually fill in the application form online. But don't do it with the first company you find. Shop around. A few extra hours or days is more than worth the extra thousands of pounds you might pay in the long run. All the major banking institutions offer these sorts of loans:

• Barclays
• The Royal Bank of Scotland
• Lloyd's TSB
• Clydesdale
• Natwest
• First Direct
• Co-op
• HSBC
• Abbey National
• Woolwich
• Alliance & Leicester

So shop around and get the best deal. Look online with various companies; look at examples of loan calculators and online tools.

The major downside of loans is that the small monthly repayment figure can tempt you to spend even more money because you think you have more money than you actually do. Lenders may even baffle you or tempt you with case studies and examples of people who sound like you or were in your position. They'll quote an example or two of their low monthly payments. Don't succumb! Take your own calculator, notepad and pen and work out your own figures before signing an application form or agreement form.

Conclusion

It is tempting to think that consolidating your loans into a single lower monthly payment is a solution, or end, to your problems. It is not. It is simply the beginning of a solution -- and the rest is up to you: pay off the loan while cutting your other expenses and living within your means. In the long run you'll be much better off.