Secured Loans for Debt Consolidation

The goal of a debt consolidation loan is to put multiple loans into one payment, which is typically lower. Usually to pay off multiple credit cards, loans, catalogues, overdrafts, car purchase and the likes, that can have high or revolving interest rates and no end in sight.

You take out a loan and pay off all of the above.

You organize the various terms, interest rates and outgoings into one monthly payment. The end goal is for you to regain control of your finances by lowering your monthly expenditures, having an end date to your debt and, hopefully, closing all store purchase credit cards after your balance is at zero.

At Fluent Money, we would take details of your existing credit and the items you want to pay off. Upon successful application, all of these items will be paid off by the lender. A lot of the time, especially if you are paying off credit cards, it makes the time needed to repay the loan shorter.

The main reason to get them is when things are becoming unmanageable. At any time people should be looking at managing their finance more efficiently. Even to just see if there is a smarter way to repay debts through either lower interest or monthly payments. You might have credit cards that you are managing perfectly well, but if they are all at 24% and we can get them down to 7% and pay it off in 10 years as opposed to 30, it only makes sense to enquire.

There are many scenarios where having a debt consolidation loan would be a good idea. Just a few examples could be zero interest on credit cards coming to an end, bringing your payments down, tidying up credit score with lower credit utilisation, putting multiple debts in one place.

If any of these are achievable with a debt consolidation loan then you should at least consider it.

Pros: One payment in one place, potentially lower monthly cost. Potentially lower interest rates. End dates to the debt vs revolving credit cards. Possibility to pay off debt quicker. Also, fixed interest rates are available for your peace of mind.

Cons: The loan amount is secured against your home. The need for careful financial management does not stop after receiving the debt consolidation loan. Making sure all unnecessary accounts are closed, thorough calculation of your income vs outgoings and keeping up with repayments is critical for debt consolidation to work. While your outgoings may reduce, the total amount to repay could be higher over longer term loans. Paying off loans early may incur early repayment charges.

Short-term: Taking out any type of credit item can mean that your credit score will take a dip until you’ve maintained payments.

Long-term: Not having multiple items of credit, especially revolving credit like credit cards, can improve your credit score.

Alongside Secured Loans, you can consolidate credit using Lifetime Equity, Mortgages or Bridging loans. All of these are offered here at Fluent Money and we will propose an alternative option if we think it’s in your best financial interest.

All of our services require the applicant to either own their home outright or have a mortgage, but there are also unsecured (personal) debt consolidation options available on the market if an individual has high income but no home equity.

Fluent Money is a secured debt consolidation loans broker. We are UK-based, regulated by the Financial Conduct Authority and have access to an extensive panel of lenders that include specialist, niche and high street providers. Applying for a debt consolidation loan with us, provided you have a mortgage, allows for a variety of options to fit your financial needs.

Fill out our quote form and one of our friendly staff will call you to take some basic information. An adviser will then be assigned to you to learn about your financial circumstances and provide you with suitable options.

No. Fluent Money only offers secured debt consolidation loans which can be even easier, since property is used as security. It may not be always possible to get a loan, but having that security gives you more options and potential positive outcomes.

You also need to be using less than a 100% of the equity in your property.

Finally there is an affordability requirement which is different from one lender to another. It includes an existing income and expenditure assessment.

Secured loans are typically more expensive than mortgages but are more often cheaper than credit cards. It comes down to personal circumstances. A person with higher income, excellent credit and looking to borrow less than £25,000 over 7 years or less, may get a better rate on a personal loan. Someone looking for more than £25,000 over longer than 7 years or with lower income, or even some missed payment etc, may get a better rate or more options with a secured loan.

Many of our customers use secured loans to repay expensive credit cards, to reduce interest and achieve the goal of having a clear end date to work towards, to clear their debts. It may not be the right option to pay off an interest free or very low interest credit card. Your adviser can discuss these options with you to give you confidence you are making the right decision before you proceed. We can even supply illustrations to help.

Most lenders will ask for account numbers and will pay the account directly to insure that your balance is brought to zero. It is worth noting that lenders are unable to close your accounts for you.

Sometimes it makes sense to take out a second secured loan. It’s a very specific product type. Technically, you can have a second charge and a third charge debt consolidation loan. Usually we try to combine everything into one, depending if it’s in your best interest.

An example would be you having a secured loan with a low interest rate and a lot of time left on it. Sometime the math suggests that taking out a second secured loan (or a “third charge”, to make things even more confusing) will be cheaper in the long-run.

Using a secured loan for debt consolidation would typically be a good option to consider when dealing with large amounts of debt. Your property allows access to a wider range of loan options including loans up to £500,000. This means secured loans through Fluent Money can help you consolidate multiple items of credit.

Fluent Money does not offer unsecured loan options.

But yes, by getting what is known as “unsecured personal loan”. Typically you will not be able to get sums above £25k without putting up your house as collateral and the interest rates can be higher since there’s more risk to the lenders.