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Debt consolidation loans are usually used to pay off and close down the other accounts where you owe money and leave you with consolidated debt that is easier to manage, with only one payment to make each month.
However, a new loan is a new form of credit, so it is important that you fully evaluate the terms in relation to your existing accounts, for example if you are committing to repayments over a longer period of time or at a different rate of interest. One of the possible downsides of consolidating your debts through this one loan is that you may end up paying more in interest than if you were to take alternative action such as transferring your outstanding balances to a 0% balance transfer credit card.
Just like other loans, debt consolidation loans can be secured – against your property, for example your home, or your car – meaning your home or car may be repossessed if you were unable to keep up with repayments. These loans are also available as unsecured, which means that you are not putting any of your assets at risk if you were unable to meet the repayments.
Either way, before you apply for a debt consolidation loan, it’s a good idea to take a look at your credit report. If your credit score is good enough, you may be able to borrow at a better rate of interest, which in turn could make a big difference to your affordability.
Experian uses your credit information - as well as information you provide about your requirements and financial circumstances - to show you products that are matched to you††.
This means you can see a list of credit products that you are more likely to be accepted for, and as it is a ‘soft search’ only you can see it on your credit report. For a credit product search that matches your credit information create a free Experian account today.
Experian doesn’t give advice on the suitability of products to customer’s needs. If you would like to get help on which products suit your needs, it is best to seek help from a financial adviser.