Will a Consolidation Loan Be Secured Against Your Property?
Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable. Typical 10.8% APRC variable
Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable. Typical 10.8% APRC variable
Are you wondering, ‘Can you consolidate secured loans?’ You’re not alone. Many people each month ask the same question. In fact, over 6,900 people visit our website each month for guidance on secured loans.
In this easy-to-understand guide, we’ll explore:
- What debt consolidation is and when it’s worthwhile.
- The true cost of a bad secured loan and how to avoid it.
- How you can consolidate your debts with balance transfer credit cards and loans.
- What a debt consolidation loan is and whether it will be secured against your property.
- The advantages and disadvantages of a debt consolidation loan.
If you’re worried about the potential risks of a secured loan or how it may impact your property, we’ve got you covered.
We understand your concerns, and we’re here to help with clear and simple advice. So, let’s take a journey together to understand more about consolidation loans and secured loans.
What is a debt consolidation loan?
A debt consolidation loan is a loan that must be used to consolidate debt. The loan pays out a lump sum, which is split between your creditors to clear all debts. You then make monthly repayments on the debt consolidation loan.
There are sometimes companies that specialise in debt consolidation and will only offer these types of loans. You’re never forced to use debt consolidation loans to consolidate debt. You can use generic loans when the lender allows it.
Will a consolidation loan be secured against your property?
Some debt consolidation loans work by requiring a property to be used as collateral in the credit agreement. The secured loan will pay out a lump sum as normal, and interest will be charged on the principal amount, which may be a fixed or variable rate.
You won’t have to use a debt consolidation secured loan to consolidate debts. You could use other secured loans, which may go by another name, such as a homeowner loan or home equity loan.
Lender |
APRC |
Monthly payment |
Total amount repayable |
|---|---|---|---|
| United Trust Bank Ltd | 5.99% |
£218.73 |
£26,247.92 |
| Pepper Money | 6.86% |
£220.24 |
£26,429.17 |
| Together | 6.95% |
£220.40 |
£26,447.92 |
| Selina | 7.5% |
£221.35 |
£26,562.50 |
| Equifinance | 7.7% |
£221.70 |
£26,604.17 |
| Spring | 10.5% |
£226.56 |
£27,187.50 |
| Loan Logics | 11.2% |
£227.78 |
£27,333.33 |
| Evolution | 11.28% |
£227.92 |
£27,350.00 |
Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable. Typical 10.8% APRC variable.
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Are debt consolidation loans unsecured?
You can find unsecured debt consolidation loans. Both unsecured debt consolidation loans and secured loans are widely available.
With an unsecured loan, you might not be able to borrow as much, and the interest rate could be higher. If the interest rates offered in these loans are higher, they may not save you money and might not be worth using to consolidate.
You’ll need to do the maths!
You might also struggle to get approved for an unsecured loan if you have a poor credit history and a low credit rating.
Does debt consolidation affect your home?
With a debt secured against your home, nothing changes to your home or your ownership. The only risk is that the lender could force you to sell the property if you don’t repay as agreed. But this only happens as a last resort when you haven’t been able to agree on a new payment plan with the lender.
This is why it’s so important to think carefully before securing any loan against your property.
What if I take out a secured loan against the equity in my home?
If you take out a secured loan against the equity in your property but have an existing mortgage, the homeowner loan provider might not force the sale even when you haven’t repaid.
Mortgage providers always have first access to the sale proceeds from a property when it has been forcibly sold. So if the property value has declined and the homeowner is in negative equity, forcing the sale might not get the loan provider its money back. All of the sale proceeds could be eaten up by the mortgage company beforehand.
Secured loans for all purposes
- Stuck paying high interest on credit card debts & loans?
- Looking to fund a home improvement project?
- Dreaming of finally taking the once-in-a-lifetime trip?
Polly
“This was by far possibly one of the nicest experiences I’ve had getting a secured loan.”
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What are the advantages of a debt consolidation loan?
The advantages of using a debt consolidation secured loan are:
- You could pay less interest compared to existing loan agreements. Most secured loans offer lower interest rates.
- Your debt will be in one place, making it easier to manage and easier to budget for just one monthly repayment
- There are many lenders offering these loans, including to people with a below-average credit rating
What are the disadvantages of a consolidation loan?
The disadvantages of a debt consolidation secured loan are:
- Your home is at risk. If you don’t repay the loan as agreed, the lender could force the sale of your home to recover its money.
- You’ll still need to be approved for the loan to consolidate other debts, which may be difficult if you have a really bad credit history
- You could temporarily lower your credit score by applying for a loan
» TAKE ACTION NOW: Compare deals from the UK’s leading lenders
How do you search for secured debt consolidation loans?
You can search for debt consolidation loans by yourself using the internet. You can either search for these loans and see what search engines throw up, or you could visit bank and lender websites you’ve heard about before. There are even comparison websites that will help you find and compare deals.
One issue with trying to search for debt consolidation loans is that you will only see the lender’s representative example. The interest rate you’re offered might not be the same as what is advertised. You should be aware of this when searching for loans and when using online loan calculators to uncover your projected debt repayments.
What about using a loan broker?
Another way to search for debt consolidation loans is to use a loan broker. These are independent professionals who will assess your needs and search the market for suitable deals. They can sometimes help you apply. But they may come at a cost or take a commission from your loan payments.
Can you get a secured debt consolidation loan with bad credit?
It’s considered somewhat easier to get secured loans over unsecured loans, and that goes for debt consolidation loans as well. It’s still possible to get a secured debt consolidation loan with an adverse credit history.
As soon as you list an asset, like a property, as security in the credit agreement, the lender’s risk is mitigated. The lender knows that it should be much easier to get its money back if you don’t repay as agreed. Thus, it will usually accept people with a lower credit score and can offer a better interest rate.
