Money lenders exist to help people in
financial difficulty. With their support, borrowers are able to make vital
purchases to help make their lives run a little smoother.
So long as they repay the funds in full, borrowers
stand to reap big rewards — namely a credit
score boost. Sometimes, however,
debts can be tricky to clear.
If the unexpected occurs, or things spiral
out of control, a little extra help could be needed to get things back on
In this situation, many turn to debt
consolidation for assistance.
is debt consolidation?
In essence, this option allows borrowers
to merge all their existing debts into one loan.
It’s typically offered to people who are
struggling to stay on top of repayments. In taking out a big enough loan, they
can move credit cards, personal loans and overdrafts into one place.
They will still owe the same amount of
money, but debt consolidation means that they’re able to reduce how many
financial services they owe it to.
With just the one lender, it can be easier
to meet repayments.
there different types?
In short: yes. There are two kinds of debt
consolidation loan: secured and unsecured.
Secured loans are usually fixed against a
large asset. Most of the time, this is the borrower’s home or property.
For this reason, it’s critical that
repayments are made in full and on time. If not, loan recipients could have
their home repossessed.
An unsecured loan is different. As its
title suggests, it isn’t secured against borrowers’ assets. Instead, lenders
analyse their credit score to determine whether or not to issue a loan to an
This type of loan doesn’t affect assets.
It could impact a client’s credit score, though — especially if repayments
can’t be made on time.