Debt Consolidation Loans with an Instant Decision

Once you’ve made the decision to consolidate your debts, you’ll probably be eager to get it over and done with. After all, debt consolidation can make budgeting easier and reduce your monthly repayments.

Keep reading to learn more about debt consolidation loans with an instant decision and where to find them.

Debt consolidation – quick recap!

Debt consolidation is when you move all your existing debt into one place. Instead of managing multiple creditors chasing you for a monthly repayment, you’ll have to make one fixed monthly payment to one creditor.

Financial management isn’t the only benefit, I’ll discuss this in more detail later on in the article.

So, how does it work in practice? Debt consolidation requires the debtor to take out one new debt to cover the other existing debts. This can be a credit card, remortgaging or, the most common method, to apply for a loan amount of the value of all existing debts. For example, you could apply for instant debt consolidation loans to pay off other personal loans, credit cards, store cards and more.

It’s essential to make sure the new debt consolidation loan has an equal or better interest rate than the interest rates you are currently paying.

What is a debt consolidation loan?

Debt consolidation loans are a type of personal loan exclusively used to pay off other debts. They are available in the form of unsecured loans and secured loans. The length of the loan term can vary depending on the lender but is most often capped at 60 months.

Some people use a generic personal loan to consolidate their credit. In any case, the loan should equal the total amount needed to pay back existing credit, and you should only apply for one of these personal loans from a lender that is authorised and regulated by the Financial Conduct Authority.

Debt consolidation loans are also advertised with an Annual Percentage Rate (APR) representative example. The representative APR is the annual rate of interest and fees that 51% of applicants received, and it’s usually included on any loan calculator.

If approved, your rate could be higher or lower than this representative rate based on your circumstances.

Alternative methods of debt consolidation include:

1. Balance transfer credit cards
2. Secured consolidation loans (remortgaging and second charge loans)
3. Some debt solutions, including a Debt Management Plan

Debt Consolidation vs. Debt Settlement

A debt settlement is a debt solution that enables people to repay their debts with one reduced lump sum payment. This is also called a ‚Äòfull and final settlement offer’, and if a lender agrees to it, you are no longer in debt to the lender. However, accepting a debt settlement can impact your credit score, and that impact is likely to be negative.

Both financial relief strategies allow you to reduce your debt load in their own way. With debt consolidation, you can reduce the number of creditors you owe and, potentially, your interest rate. However, you may have to extend your repayment term.

On the other hand, with a debt settlement, you will have to pay more upfront, but your overall debt amount is reduced.

As you can see, this MoneySavingExpert forum user owed money to a variety of organisations. They reached out to each one and managed to settle their debts for less. Some organisations even accepted settlement offers that were 10% less than the original amount.

Understanding interest rates

When looking into taking out a loan, it is vital to understand the difference between fixed and variable interest rates. No matter what’s happening on the market, fixed interest rates will stay the same throughout your deal. In most cases, they will only change at the end of your agreed period. At this point, you’ll automatically move onto a standard variable rate (SVR) which is often much higher than a fixed rate.

The rate of variable interest rates can change at any time, which means you should be prepared for a hike in price should the rates rise. However, lenders sometimes offer discounted rates for a period of time at the beginning of a deal.

When it comes to debt consolidation loans, most are fixed, which means you should pay the same amount every month. From my experience, this can give borrowers peace of mind and help them stay within budget.

The benefits of debt consolidation loans

Using a debt consolidation loan could provide an array of benefits, namely:

1. Financial simplification. The new loan will make you responsible for one monthly payment only. This single monthly repayment is easier to stay on top of, mitigates any chance of creating more debt problems, and subsequently protects your credit score. It’s a fantastic way to take control of your finances once again.
   
2. You may be able to access a better interest rate which would make future monthly repayments cheaper than your current cumulative monthly repayments. 
   
3. They are widely available, and some debt consolidation loans come with an instant decision.

The negatives of debt consolidation loans

1. Not everyone is eligible for a debt consolidation loan. Although it’s not impossible, those with poor credit scores or poor credit history may struggle to be accepted for a debt consolidation loan.
   
2. A debt consolidation loan is not always guaranteed to save you money. One of the primary uses of a debt consolidation loan is to save money on interest. However, it is not guaranteed that the loan you are offered has a lower interest rate, so you may actually end up paying more. It is important to do a risk assessment to ensure you won’t lose out in the long run.
   
3. With some debt consolidation loans, you are subject to additional costs and fees, which you wouldn’t have to pay if you didn’t take on a debt consolidation loan. This is more relevant to balance transfer cards. However, it is certainly something to look out for.
   
4. Some debt consolidation loans have penalties for early repayments. This means that you will be charged a fee should you want to pay your loan back earlier than agreed.

How hard is it to get approved for a debt consolidation loan?

When you apply for an unsecured debt consolidation loan, the lender is responsible for ensuring you can pay your monthly payments. They do this by assessing personal circumstances such as income and checking your credit score. 

Lenders want to give money to people with a track record of managing credit repayments well. You may be rejected for a debt consolidation loan if you have a poor credit score. However, due to the nature and use of these loans, many lenders advertise their debt consolidation loans for people with bad credit.

As I see it, if you have a poor credit score, you may still get approved, but the interest rate may be higher than expected, i.e., a lot higher than the representative example.

Criteria for debt consolidation loan eligibility

Borrowers must meet the criteria set out by lenders to get a debt consolidation loan approved. Common criteria included your debt-to-income ratio, creditworthiness, employment status, current income, outstanding debt, and credit history.

How long does it take for a debt consolidation loan to be approved?

Thanks to automated technologies and fast credit checks, most people can get an answer on their debt consolidation loan fast. Some companies can provide an instant decision or a decision within just a few minutes. This is even more likely if you apply to a bank where you’re already a customer with a bank account.

On other occasions, it can take a few days, especially if additional checks are needed, or the lender requests further information about your income. 

Debt consolidation loans with an instant decision

Here are some examples of consolidation loan providers claiming to give an instant application decision. They’ve been included for this reason only and are not necessarily the best option available: 

1. Bamboo Loans

Bamboo Loans offer these loans up to £8,000 and have a service that provides an immediate quote without checking your credit report. This can benefit those window shopping, but remember, the quote is not guaranteed.

2. Post Office

The Post Office has a similar service that will instantly tell you how likely you are to be approved, and they also won’t leave a mark on your credit score. The actual application decision is instant inpersonalised

3. Pegasus

Pegasus is an online lender that promises instantaneous decisions for most applicants. You can apply via their online loan application. They also claim to put the money in your account within 60 minutes. Their online reviews are exceptional at the time of writing. 

4. Zopa

Zopa claims to offer a personalised quote on your application within just three minutes. Their representative rate is currently 15.4%, and credit is available between £1,000 and £25,000. They also have good online reviews.

5. Your bank

Because your bank already has lots of financial informationpersonalisedy can make decisions swiftly. And the money is likely to be received faster as well. Check to see if your bank offers debt consolidation loans with an instant decision.

How long does it take to get the money?

Once you have received a decision – hopefully a quick one – you will be offered the loan at a personalised interest rate. You’ll then need to read the terms and conditions of the credit agreement, and if satisfied, you may need to sign it and send it back.

If not already done within the initial application, you must also supply the lender with your bank account details.

Some lenders claim to put the money in your bank on the same day or within the same hour. Again, this is more likely if you personalisede loan provider. The process could take a couple of days on weekends or bank holidays. It all depends on your new loan provider.

Will I qualify for a debt consolidation loan?

The FCA allows each lender to assess your ability to repay the full loan amount over monthly payments. The decision is entirely personalised, so there is no way of knowing if you will be approved for a debt consolidation loan. This also means that one lender could reject you, and another could accept you.

Don’t think this gives you a free pass to apply everywhere. Doing so could affect your credit score in a bad way, as multiple credit inquiries in a short space of time can negatively impact your credit score.

Consider a Debt Management Plan (DMP) or another debt solutiospecialisednnot get one of these loans. A DMP is a bit like consolidating debts but without the need to apply for more credit.

Will my bank give me a consolidation loan with bad credit?

Banks are unlikely to award one of these loans to people with bad credit, even if you already bank with them. However, some specialized lenders may still offer loans to those with bad credit. Most “bad credit debt consolidation loans” are advertised by online lenders rather than high-street UK banks.

Consolidation loan advice for individual circumstances

Knowing what to do and where to apply can be difficult, but it is easier with free debt advice from a charity registered in England, Wales, and Scotland. 

I’m talking about Step Change and National Debtline, two amazing charities providing tailored advice and financial counselling to people with debts. Contact them for support today!