Today’s post is a guest post by Michael over at Lending Circle – enjoy!
If you’re a subscriber to the monthly figures delivered by the Office for National Statistics, you might well be misled into thinking that these are easy times financially. Inflation numbers have stubbornly remained around zero throughout the year, while wage growth has been pretty positive in that time too.
But such numbers belie the facts, which, largely due to the housing crisis, suggest that the cost of living is currently as high as it ever has been in the UK. As a result, debt has become an unavoidable reality for many of us, and not all of it will have been garnered at an affordable rate either. In particular, credit cards present a convenient, short-term answer; but also one that comes at a high cost in terms of the APR on repayments.
But for those who find themselves saddled with expensive rates on various loan repayments each month, there is a quick, easy and cost-saving solution. Debt consolidation loans are as old as the hills, but surprisingly few people are aware of them. The principle is simple… simply take out a single, low-interest loan to pay off all your debts, leaving you with a solitary direct debit each month to pay off this one remaining good-value loan.
The appeal of peer-to-peer platforms
Aside from the reduced hassle of no longer having to juggle different lines of credit, with different APRs and different repayment dates, a debt consolidation makes an immediate and enduring difference to your monthly budget too. That means minimum effort, for maximum saving.
The key, of course, is to find this golden goose of a low-cost loan. After all, if you aren’t able to find a superior APR on your debt consolidation loan, the exercise becomes rather pointless!
The good news, however, is that the current climate for unsecured borrowing is incredibly favourable. That’s in part down to record-low Bank of England rates, but perhaps the biggest contributor of all has been the increasing diversity and competition that’s been brought to the consumer credit market by alternative lenders.
Indeed, the landscape is no longer dominated by banks and other inefficient high-street institutions, and one big driver of this shakeup has been the rise of peer-to-peer lending (P2P) platforms. These companies function entirely online, and facilitate the matching of funds from consumers willing to lend their money directly with those seeking a loan. Such a streamlined approach eliminates any intermediaries from the equation, thus leaving both borrower and lender to reap the benefits of this added value (the lender receives a return of up to 6 per cent, while the borrower gets a loan at a similarly competitive APR).
The application process is simple too, requiring just a couple of minutes of one’s time to acquire a personalised quote and subsequently complete the application. A decision is then returned within a working day, and, if approved, funds can be expected overnight.
In addition, P2P platforms also offer the borrower a greater degree of flexibility than most personal loan providers. The amount which can be borrowed ranges from £1,000 to £25,000, and you can also select the period over which to pay it off (usually 1-5 years). Furthermore, some platforms such as Lending Works even allow borrowers to make overpayments and early settlements at no extra charge.
Finding the best debt consolidation loan for you
Then again, there are a vast number of good-value loans out there, as a quick glance at a price comparison site will reveal. The point to note is that this isn’t a time for resigning to your fate when it comes to your finances. Instead, a proactive decision like taking out a debt consolidation loan is a way of making a material difference to your cost of living, and even paving the way to becoming debt free.
And whether that source of saving comes via a peer-to-peer lending platform or otherwise, the solution for you is out there. The time to take control of your debt is now.
Nicola: if you’re in debt and need a more manageable solution to repayments, this is a great way to do it, providing you cancel and cut up your credit cards. If you only have the loan to pay, you can be debt free quickly, but if you run up more debt on the now available credit cards, it may make your situation worse.