One of the many benefits to consider when taking a consolidation loan is that you would just have to payout one monthly repayment to just one lender. This could allow you to be able to keep track of your finances more easily than if you have many creditors. However when considering adding the debts of loans and credit cards together and paying off these debts you would have to be able to restrain from borrowing on credit cards in the future.

To make a consolidation loan work in your favour you would have to take a loan that offered a great rate of interest. If you have store cards and credit cards you have borrowed against then you could be paying a very high rate of interest on them. The interest rates of a consolidation loan are generally cheaper than the rate of interest with credit cards so you save each month. Usually individuals considering taking on a consolidation loan would spread the cost of the loan out so that they pay less each month. By paying out less each month with the consolidation loan than when paying individual creditors this would give you a little extra money to make life that much easer each month which allows you to get back on your feet again.

A consolidation loan could stop you from struggling to meet your repayments each month. If you were to fall behind on repayments for loan or credit cards or are late paying them then you might have to payout extra in bank charges which can soon mount up if you are late with payments on a regular basis. You would also see your credit file being affected by late and missed payments which would make obtaining credit of any kind very hard if not impossible in the future.

• When looking for a debt consolidation loan consider getting advice from a specialist debt management company. Some websites offer advice of consolidation loans and other ways that you could clear your existing debts and get back on the straight again. However, never pay for debt advice – reputable organisation will give you the advice for nothing.
• Be aware that a debt consolidation loan could only be used to consolidate debts which are considered to be non-essential such as loans, store cards and credit cards. You cannot add your mortgage repayments into a consolidation loan.
• Interest rates for consolidation loans are generally cheaper than the interest rate you will be paying when borrowing on a credit card or store card.
• Shop around for the best consolidation loan with the cheapest rates of interest as they will vary considerably with lenders.

Pay Day Loans
You can apply for a pay day loan on the Internet. Essentially a pay day loan is like an advance on your next pay check. The wonder of pay day loans is that they rarely check to see what your credit rating is, but check to see you are gainfully employed, how much you make and when you’ll next be paid. Once they have this information – by you providing them with copies of your pay-slips – they’ll then lend you the money. One word of caution with pay day loans, the fees can be high, so while this is a good short-term solution to any cash-flow problems you may be having, it is not suggested that you use pay day loans for long-term funding.

Bad Credit Cards
With the increased competition among credit card providers these days, it is possible to obtain a credit card even though you have a poor credit history. However, if you are thinking of applying for a credit card with a bad credit history, you should expect to pay a higher rate of interest and have a lower credit line.

Online Loans
A number of online lenders today advertise that they are willing to lend to people with a bad history of credit. Again though, don’t expect the repayment terms or interest rate to be very favorable to you. Also, keep in mind that the lender may ask that you secure the borrowing against an asset you have.

Family
Finally, if all the other lenders have turned you down, but you desperately need to borrow the money, think about approaching a family member who has a better credit rating than you do to lend you the money. In return for which, you will give them an IOU and repay the loan for them. In fact, this could possibly be the cheapest option you have, but it may put additional stress on your family relationship.

So, even if you do have a bad credit history, if you still need to borrow money there are a number of options out there for you to consider!

Fixed rate interest is exactly as its name suggests – interest fixed throughout the period of the loan.  The advantage of having a fixed rate interest is that it is easy to calculate the exact figure you need to repay.  Your budgeting can then reflect this.  The downside is that there is usually a breakage fee (cost of funds) if you want to repay the loan early.

Floating Rate Interest

Floating rate interest can work in a number of ways. Usually, however, you’ll see this described as being: Base Rate plus basis points.  Although the basis points (which is a percentage figure) are fixed, Base Rate is a floating rate set by the Bank of England from time-to-time; hence the overall interest rate floats.  The upside to a floating rate interest is that there is rarely a breakage fee – if you make early repayment.  The downside is that the rate can swing very quickly against you – as happened in the early 1990s when the Bank of England was raising Base Rate almost weekly.

The best way to try to calculate whether to use fixed rate interest or floating rate interest is to ask the lender to do an Annual Percentage Rate (APR) calculation for you.  APR calculations are adjusters, and so this should help you to determine the real rate of annual interest you’ll need to pay on the loan.

THINGS TO THINK ABOUT

Finally, here are some things to think about if you’re considering a loan:

1. is it absolutely necessary for you to fund the purchase through a loan.  Sometimes dipping into your saving will mean you save in the end;
2. look around for the cheapest (cost) loan;
3. when looking at interest rates, always ask an APR calculation;
4. make sure you fully understand the security issue;
5. don’t agree to any add-ons, like insurance, unless you believe you’ll need them;
6. if you’re going to need to fund the purchase for a period over one year, a loan will nearly always be cheaper than other forms of short-term debt financing – like a credit cards;
7. don’t sign any loan agreement unless you’re completely satisfied you understand what’s being asked of you.  All too often, we are in a hurry to buy the product and don’t read the small print.  Remember, “buy in haste, resent at leisure.”