In this post, we weigh up the pros and cons of consolidating existing borrowing into one payment with a consolidation loan.
If you’d like to clear and simplify your borrowing, you may want to consider a consolidation loan. Managing several credit commitments all at once can be challenging.
Finding time in our busy lives to keep track of it all can lead to financial mistakes like missing payments that may negatively affect your credit score. Not to mention the potential high monthly interest rates on some borrowing, such as credit cards, store cards, personal loans, and overdrafts.
Your borrowing can become particularly expensive if you are not clearing your credit card balances each month and choosing to make the minimum payment. According to the Money Charity, in April 2022, a credit card on the average interest rate would take 25 years and 2 months to repay if you’re only making the minimum legal repayments every month.
With a consolidation loan, you can combine and repay all your outstanding credit balances into just one monthly payment. In doing so, you’ll no longer need to manage various payments and monthly commitments, as these are replaced by one fixed payment each month over an agreed period, for example, three or five years.
Plus, a consolidation loan may reduce the amount of interest you pay by having all your debt in one place at a lower interest rate. However, it may extend the overall repayment time, so ahead of choosing to consolidate, please consider the total interest paid in total as this may be more than your existing arrangement.
If you have multiple credit commitments, a consolidation loan could be suitable. Still, to know for sure, you need to consider both the pros and cons of this decision. And, of course, assess your current financial situation and what plans or potential life events you have coming up that may impact your finances. We’ve compiled some pros and cons of consolidation loans so you make the right choice for your unique circumstances:
At Pepper Money, we provide secured consolidation loans to our customers, helping them streamline their repayments into one manageable monthly payment.
To be eligible for a secured consolidation loan, you must be a homeowner with an existing mortgage as the borrowing is secured against your property. You can borrow higher amounts with a secured loan up to the maximum equity that you’ve built up in your home. If you would like to find out how much you could borrow, visit our homeowner loan calculator.
As mentioned earlier in this article, you may lose your home if you cannot keep up with the repayments, so think carefully before securing further debts against your home.
When taking a consolidation loan, please consider the length of the loan as you may pay more interest over longer periods than your current credit commitments.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
It only takes a few minutes to get a quote online. See if a homeowner loan could be right for you.
UK Mortgage Lending Ltd (UKMLL) t/a Pepper Money is authorised and regulated by the Financial Conduct Authority (FCA) under registration number 710410 as a provider of regulated mortgages. The FCA does not regulate our Buy to Let mortgages. UKMLL is a member of the Finance and Leasing Association and follows its Lending Code as a provider of second charge regulated mortgages. Registered Office: 4 Capital Quarter, Tyndall Street, Cardiff, CF10 4BZ. Registered in England and Wales under Company Number 08698121.
Pepper Money Limited t/a Pepper Money is authorised and regulated by the Financial Conduct Authority under Firm Registration Number 811609 as a provider of regulated mortgages. The FCA does not regulate our Buy to Let mortgages. Registered Office: Harman House, 1 George Street, Uxbridge, London UB8 1QQ. Registered in England and Wales under Company Number 11279253. Calls may be monitored or recorded for training, compliance and evidential purposes.