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What debt can be consolidated?

Written byKoyo Loans
Last Updated29th November 2022
Contents
  • Introduction 
  • What debt can be consolidated?
  • Can I consolidate all my debt? 
  • How do personal loans for debt consolidation work? 
  • Should you consolidate your debt? 
  • Who can consolidate my debt? 
  • Are personal loans good for debt consolidation? 
  • Does debt consolidation affect buying a car? 
  • Does debt consolidation affect buying a home?
  • Conclusion

In 30 seconds… 

You can apply for a personal loan for debt consolidation to pay off any form of outstanding credit. Most people consolidate their credit card debt, but you can also consolidate outstanding personal or car loans, for instance. Before consolidating your debts, you need to work out if it’s financially viable to do so. If done correctly, a personal loan for debt consolidation should result in one monthly repayment that is lower than the combined total of your previous debts. Personal loans are ideal for debt consolidation, and you can apply for one from your bank or a third-party lender.

Introduction 

Many borrowers commonly use personal loans as a means of debt consolidation. However, this can be risky and requires an in-depth look at your own finances before applying. Below, we’ve gone into detail answering commonly asked questions surrounding debt consolidations, to give you a clearer understanding.

What debt can be consolidated?

You can use a personal loan to pay off various forms of credit. It’s ideal for paying off multiple credit cards and other expensive forms of credit, as you can often negotiate a loan with a lower rate of interest to consolidate debt, than that of your current debts combined. 

You can also use a personal loan for debt consolidation, to pay off a car loan, wedding loan, or even a home improvement loan. Essentially, any form of credit that you have outstanding, you can typically use a personal loan to pay it off. However, bear in mind that certain lenders might have different requirements, so it’s best to check the eligibility criteria and read the terms and conditions of your chosen loan before applying. 

The key thing to remember when applying for a personal loan for debt consolidation is that you need to do your sums. A loan for debt consolidation purposes is only viable if it makes your current finances more manageable and more affordable. You can use our debt calculator to help you work out how much you can borrow and how long you will have to pay it back. This will give you a clear indication of whether a personal loan for debt consolidation is worth it for your current financial circumstances.

Can I consolidate all my debt? 

Depending on how much debt you currently have, you might be able to consolidate all of your debts in one go. But you will need to find a loan that covers your current outstanding debt, which is the first and most important step. 

For instance, if you owe £2,000 on one credit card and £3,000 on another, you can consolidate all of your debts by taking out a loan of £5,000. But it’s often not as simple as this, as many people have multiple forms of high-interest credit that need to be considered. So, you absolutely can consolidate all of your debt, but it really just depends on how much you have outstanding. 

At Koyo Loans, we offer unsecured personal loans of between £1,500 and £15,000 that can be used for debt consolidation. 24.9% APR Representative. You can use our personal loans to pay off other outstanding forms of credit, such as credit card bills. So, if your current debt totals £15,000 or less, you could use a Koyo Loan to consolidate all of your debts in one go. 

How do personal loans for debt consolidation work? 

A personal loan for the purposes of debt consolidation is a financial product that you can apply for to pay off your existing debts. So, if you have multiple credit cards and a car loan outstanding, for example, you can apply for a loan to repay all of them over a set term. 

Let’s say that you owe £3,000 on your credit cards and your car loan still has £5,000 outstanding. You can apply for a personal loan of £8,000 to cover your outstanding debts. Then, when the money is deposited into your account, you can pay the credit cards and car loan off in one go. You are then only required to meet one monthly repayment – that of the personal loan – which makes it much easier to manage your finances. 

When done correctly, a personal loan for debt consolidation may also save you money. You should calculate how much money you owe, plus interest, and look for a personal loan that offers lower payment terms. So, not only can it make your life easier, but it can also save you money as you pay back the money that you owe.

Should you consolidate your debt? 

Consolidating your debt can be an effective way of improving your financial circumstances. If you have multiple forms of credit outstanding and are finding it difficult to manage your repayments, a personal loan for debt consolidation, can potentially help you. 

But the key thing is that you need to calculate whether or not it is financially viable to apply for one. If the interest rate on the loan is higher than it is on your existing debts, it defeats the point of debt consolidation. This is why it’s so important to accurately calculate your current interest rates and compare them to those that you’re offered for a personal loan for debt consolidation. 

If it transpires that you will pay less interest over the course of a personal loan, then it’s worth it. You will also benefit from the fact that you only need to make one repayment to service your debts, which is a lot less stressful than having to make multiple payments from your bank account every month. 

Who can consolidate my debt? 

You have a number of options when it comes to consolidating your debt. You can look for a loan from your bank or building society or approach a third party lender like Koyo Loans to apply for a loan for debt consolidation.

Loans often come in the form of unsecured personal loans, which can be used for various purposes. When you apply for a personal loan, the lender will ask you what you’re planning to use the money for. In most instances, debt consolidation is a perfectly acceptable reason to apply for a personal loan, so you shouldn’t have any issues in this regard. 

If you’re struggling with repayments and think debt consolidation could help you, it can be helpful to reach out to a reputable charity to offer you advice. You can either speak to someone at StepChange or the National Debt Line, and you will receive accurate and impartial advice on how best to deal with your debts. This is a helpful starting point if you’re not sure about the best way to deal with your current debts and are considering debt consolidation.

Are personal loans good for debt consolidation? 

Personal loans are ideal for debt consolidation because they’re flexible, straightforward, and relatively easy to apply for. You can apply for a personal loan from your bank or building society, as well as online lenders like Koyo Loans. 

To be approved for a personal loan, you will need to stipulate your intended use of the money. While every lender has different terms and conditions, most deem debt consolidation as a perfectly acceptable use of a personal loan. On your application, you’re required to declare how you plan on using the loan that you have applied for, so it’s important to be upfront with your lender. 

At Koyo Loans, we provide unsecured personal loans of between £1,500 and £15,000 that you can use to consolidate your debts. You can use our loan calculator 24.9% APR Representative to work out how much you can borrow and how long you have to pay it back, which is an important step in ascertaining whether a personal loan for debt consolidation is a smart move for your current financial circumstances. 

Does debt consolidation affect buying a car? 

Debt consolidation could affect your ability to buy a car, but it depends on how you’re planning to pay for it. For instance, if you pay for a new car with cash savings, you don’t need to worry about your credit history, and your buying experience won’t be affected. 

However, if you’re planning to buy a new car with a personal loan or another finance arrangement, a loan for debt consolidation could come into play. Importantly, a lender will look at your credit history before approving you for any type of car loan, so if you have a history of bad credit, you might struggle to get the money you need to pay for the car. 

Also, lenders will consider your current debt-to-income ratio before agreeing to issue you credit. If you have too much debt, you might struggle to access a car financing plan. But generally, debt consolidation won’t necessarily negatively affect your chances of financing a car, and it really just depends on your personal circumstances. 

Does debt consolidation affect buying a home?

Your current level of debt is likely to affect your ability to get a mortgage, which will, in turn, impact your ability to buy a home. However, consolidating your debts shouldn’t negatively influence your chances of acquiring a mortgage. 

Your credit score is likely to take a short term hit, but with regular monthly repayments on a personal loan for debt consolidation, you will actually help your credit score in the long run. When done correctly, consolidating your debts improves your financial circumstances and shows lenders that you’re taking responsibility for your repayments. 

Therefore, debt consolidation may actually improve your chances of accessing a mortgage, particularly if you reduce your risk of missing repayments on your current debts. Ultimately, improving the way that you manage your current loans through effective debt consolidation can help your credit score in the long run, which may help your chances of getting the mortgage that you need. 

Conclusion

Remember – it’s vital to analyse and assess your own financial situation before applying for any type of loan, especially for the purpose of debt consolidation. If we haven’t answered any of your questions in our articles, please feel free to get in contact with us here.

Koyo Loans is the trading name of BETR Technology Ltd. Company No. 11483187. Registered Office: Huckletree Soho, Ingestre Court, Ingestre Place, London, W1f 0JL

Key takeaways 

The most important thing to remember when planning to consolidate your debts is whether it makes financial sense to do so. You should calculate the interest that will be due on your new loan and compare it to the rate that you’re currently paying. This will highlight if it makes sense to consolidate your debts. 

Once approved for a personal loan for debt consolidation, the money will arrive in your account. You can then use it to pay off all of your current outstanding debts. Thereafter, you will only be responsible for one monthly repayment, which should be less than the combined total of your previous debts. 

Taking back control of your finances is crucial, as your level of debt – and your ability to repay it – will likely affect your ability to buy a new house and car. Your debt can also affect various other aspects of your life, so opting for debt consolidation can really help you get back on your feet. Overall, provided you do the sums and find a personal loan at a reasonable rate of interest, debt consolidation can be a great thing for the present and future of your personal finances. 

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