• Unsecured loans are many people’s first choice for consolidating debts however they are often the most difficult type of loan to get.

• Unsecured loans represent the highest risk of lending for creditors; there is no security in the agreement and it is time consuming and expensive for them to recover the money if things go wrong.
  
  
• In order to get an unsecured loan you will need to have a clean credit reference file, be able to provide address information for 3 years and employment history for 12 months. You must be permanently employed and be able to prove you can afford the payments including the payments to all other credit you already have.
  
  
• The law limits unsecured loans at £25,000 but for tenants they are very unlikely to be much more than £10,000.

• If you have had ANY problems with going over limits, making missed or even late payments your credit reference file will reflect those problems as adverse information and it is almost certain that your application will be turned down by the lenders.

If you feel that you would qualify for a unsecured loan, please contact us and Debt Solution Services will check your situation with a view to placing your application.

Things to consider before taking a loan

Before you consider taking out a debt consolidation loan you should consider the following:

1. As there are sometimes charges and penalties for early completion of a credit agreement always ensure you obtain a settlement figure from your existing lenders rather than a balance. Otherwise you could find you have not borrowed enough to repay your other debts in full.

2. Once you know exactly how much you owe and what the cost of your debt consolidation loan will be, you must take time to work out a realistic income and expenditure figure to establish whether or not you can afford the new payments. Remember to include an amount for contingencies and emergencies. If the sums still do not add up, then perhaps you should consider some form of debt restructuring plan.

Pros of a debt consolidation loan

• May be able to reduce your monthly payments.
• Can take off some of the pressure you may be under from your existing creditors.
• You will have only one creditor to deal with.

Cons of a debt consolidation loan

• Can cause you to pay more over a longer period.
• Can give you a false sense of financial security and lead to further borrowing on credit cards and overdrafts leading to even higher debts in the future.
• May incur additional costs for setting up the loan.
• If the loans you are consolidating have all the interest added at the start you may in effect be paying interest twice. The interest charged for the first loan and the interest charged for the consolidation.

If you are considering a loan to consolidate your debt problems, or would just like more information, contact one of our advisors today for advice on how best to resolve your debt problem.