Suppose it is the 10th day of the month and you have just received a call from one your many creditors reminding you about the date of payment of the monthly instalment you owe to him. Just as you keep the receiver down, another lender calls you and tells you that you have missed the payment for the current month and that a late fine of 5 pounds will have to be paid by you along with the monthly instalment. Finding yourself at a loss, you ask your wife how many loans you have actually borrowed and get a confused reply: “It is 5…or 6…? I am not very sure actually?!"



The situation described above may seem ludicrous, but there actually are many people in UK at present who are similarly bewildered at the beginning of every month when the due dates of the monthly instalments come and go. It is for such puzzled and troubled people that a debt consolidation loan is meant.

The primary purpose of a debt consolidation loan, as is clear from the term itself, is to consolidate all your present debts into one so that they become manageable for you. Other advantages of a debt consolidation loan are:

oImprovement of your credit record

oFreedom from multiple creditors and their frequent reminders

oA long repayment term which brings down your monthly instalments

oLower and sometimes fixed interest rate

Like some other loan products, debt consolidation loan too can be secured or unsecured.

A secured debt consolidation loan requires collateral to be furnished by the borrower and therefore it turns out to be a low-risk enterprise for the lender. He thus can allow you low interest rates and long repayment term.

An unsecured debt consolidation loan, on the contrary, requires no collateral to be furnished by the borrower and hence it becomes a high-risk loan product for the lender. He, thus, can not afford to allow low interest rate and short repayment term for the loan. As a result the monthly instalments for the borrower will become high. But, considering the risk which the lender faces in disbursing such a loan, the disadvantages can be overlooked by the borrower.

Debt consolidation loan are available to people with poor credit record as well. So, if your multiple loans have resulted in missed payments, arrears, defaults, county court judgements (CCJs) and bankruptcy being written against your name, you need not worry.

Before you apply for a debt consolidation loan, log on to some online sites and compare the interest rates offered by the best lenders UK. This will help you choose the best deal for yourself and save you valuable time.