If you want to simplify your finances and pay off some of your debts, taking out one personal loan may be the answer.
Managing your money and budget can be difficult if you’ve got debts with several different companies. You may need to pay off credit cards or another loan, so taking out a single bank loan to cover them all could be the easiest way to make your finances more manageable.
Consolidate your debts into a single loan
If you’re a UK resident, aged 18 or over and have had a current account for at least 3 months, you may be able to borrow between £1,000 and £25,000 and bring your debts together in one place to reduce the amount of interest you pay.
The amount you can borrow will depend on a number of factors like your credit history and your ability to make the repayments.
Things to think about
You may have settlement fees to pay off your debts early, and the extended period of the new loan may mean you pay more interest. Make sure you check the settlement fees and interest rates before you make a decision
Simplify your budgeting
If you take out a personal loan to pay off your debts, you’ll only have one monthly payment and one debt. You’ll know exactly how much this is so you can make sure you set enough money aside to repay it each month.
You’ll still have the same amount of debt but a single monthly sum makes it much simpler to pay off.
Lower the monthly repayments
Consolidating your debts into a personal loan also means that you may have longer to repay them. You can spread the loan over a maximum of 7 years, so if this is longer than the term on your existing debts, you may be able to reduce the amount you pay each month.
Reduce your interest payments
With a personal loan, you could also reduce the amount you pay in interest. Each of your existing debts will have its own interest rate, as will the loan you take out to pay them off.
But, if the interest rate on your new loan is lower than the combined interests of all your other debts, it could be cheaper in the long run.
See how much you could borrow
If you’re registered for Internet Banking, most banks will let you use a loan calculator to see how much you could borrow. You may also be able to apply for your loan online in just a few clicks.
When you apply for a loan online with your existing bank, the loan is usually paid straight into your current account.
And if you log into your bank account online you can check to see when the loan has been paid in and also to track the money you’re paying back. It’s usually done by direct debit and you’ll be able to see month by month how much you have left to pay off.