We explain what debt consolidation is and how a consolidation loan can help when your finances are overstretched.
The cost-of-living crisis is affecting us all. From spiralling energy bills to the cost of the weekly food shop, it’s all adding up to higher outgoings each month. Frustratingly, it’s lower income households who are feeling the effects the most, with a bigger share of each month’s money going on essentials.
Many of us also have other monthly debt-related costs to pay, such as credit card and loan repayments as well as overdrafts. If you’re repaying multiple debts, you might be able to lower your monthly payments by consolidating them. As well as giving you little financial breathing room, this can simplify your finances and make them easier to manage.
Here, we explore what debt consolidation is and how a consolidation loan can ease the pressure during this time of increased everyday spending.
Juggling two or more debt repayments? You’re not alone.
The average UK household has £2,394 of credit card debt and just over £4,000 in debt on unsecured loans. That means lots of households are spending a significant chunk of their monthly income on debt repayments to different lenders, all while the costs of food, fuel and family life continue to increase.
It can be tempting to bury your head in the sand when finances feel stressful, or worse, dip further into an overdraft or credit card just to get through. But this is likely to get you deeper into debt and struggling further down the line.
Recent research by a major lending platform shows that a growing number of people are using consolidation loans to bring down monthly outgoings and manage their debt better, with 41% of people who searched for a loan wanting to consolidate debt. As long as you don’t take on further debts in addition to a consolidation loan, it can be a sensible approach to getting your finances back on track.
How can a consolidation loan help?
Debt consolidation means borrowing one lump sum to pay off multiple other debts. It can be a positive step back to financial security, while freeing up a little extra money each month to spend on other things.
By taking out a loan to consolidate your other debts, you can have:
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Simplified outgoings, with just one debt repayment to manage
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A lower monthly repayment amount – although this may mean you pay more overall in the lifetime of the loan
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A potentially lower interest rate – depending on your current repayment interest rate
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An improved credit score – particularly if you use debt consolidation to pay off a credit card or a high interest loan
It’s important to be aware that some debts come with early repayment penalties. So you’ll need to factor those into your decision about paying other debts off early and be sure to borrow enough in your consolidation loan to cover those costs too.
How GWCU can help you with debt consolidation
As an ethical lender dedicated to helping people have a healthier financial outlook, we’ve helped lots of customers make their debts more manageable by offering debt consolidation.
When you take out a GWCU consolidation loan to pay off your other debts, you’ll have:
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Zero set up fees
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Your choice of repayment schedule – monthly, fortnightly or weekly
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A fixed interest rate, starting from 13.9%
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No charges for paying off your loan early, so if you’re able to clear your debt faster than expected, you won’t pay any extra
When you apply for a loan with GWCU, our lending team will look at your situation to make sure a consolidation loan is a good fit for you. We’ll be clear about your repayments and how much you’ll pay over the lifetime of the loan, and if you’re better off staying with your current debt arrangements, we’ll let you know.
If you’re struggling to make repayments on existing loans, you may need specialist debt services to help you manage, rather than debt consolidation. We can direct you to the right services if that’s more appropriate for your circumstances.
Apply online or contact our friendly team
To find out how much your regular repayments would be with a GWCU consolidation loan, try our loan calculator and apply right away. Since this is a new product we’re offering, we understand that the application process might be unfamiliar or challenging. If you struggle with the application, or have issues completing the form successfully, don’t hesitate to reach out—we’re here to help you every step of the way.
