There are always other choices like balance transfers and snowballing, but one of the quickest means of taking a chunk out of your repayments is to consolidate your high-interest debts. Interestingly, debt consolidation loans have been around for a very long time, but they aren’t all that widely known. Perhaps that is largely due to the fact that, until recently, tracking down a low-cost loan has been like finding a needle in a haystack, so finding a lender who offers an APR that significantly undercuts other debt wasn’t worth the effort.However, as interest rates have continued to remain at record lows, and a range of alternative finance providers have brought some much-needed competition to high-street banks, the landscape has become a whole lot more favourable for borrowing.
What it means is that for those of you who have accumulated significant credit card debt, overdrafts or other high-interest debts over the years – or even just in the build-up to Christmas – there is an easy way of taking the load off your shoulders. All you need to do is shop around to find a provider who will offer you a single, good-value loan to cover all your expensive debts, leaving you with just the sole remaining loan to worry about paying off each month and at a much better rate.
Aside from the huge savings in interest repayments, you’ll make straight off the bat, there is the improved convenience of only having to juggle one obligation, with one repayment amount and one repayment date.
The emergence of peer-to-peer lending
So, where to find this golden goose of a loan? Price comparison sites offer a comprehensive overview, but one thing I noticed was peer-to-peer lenders seemed to be offering the best-value representative APRs. It’s probably not much of a surprise, given how they operate. Such platforms function entirely online and match the capital from those consumers who elect to lend their money (as opposed to putting it into savings) directly with those in need of a loan.
It’s a streamlined transaction that needs no intermediary and means that both lender and borrower benefit from the good value in the equation. From the borrower’s perspective, representative APRs tend to start at around 6% with peer-to-peer lenders, and the application process is as simple as completing a brief online form. The turnaround time for approval and the release of funds is no more than two working days too, so you can expect to begin saving money almost immediately.
You also have the freedom to choose the length of time to pay off the loan (1 to 5 years), while the upper limit of £25,000 should hopefully be sufficient to gazump the capital balances on your other outstanding high-cost debts. Some platforms such as Lending Works even allow early settlements to be made at no extra charge. Indeed, fees, in general, are minimal, and clearly communicated (P2P platforms are FCA regulated), so there need not be fears of any nasty surprises.
But then again, on a given day, there might be other forms of provider out there offering even better value on loans, so it’s well worth doing a bit of homework and finding the best deal you can. The important thing to take from it all is that if you feel like your credit card balances and debt are beginning to spiral, debt consolidation is a simple fix to nip this in the bud.
Don’t underestimate how inhibiting high-interest repayments can be on your monthly budget. With only a small amount of effort on your part, you can bring things back under control, and begin the march to becoming debt-free.