How a Personal Loan Can Help You Pay off Debt and Build Credit
According to the ONS, average household debt in the United Kingdom has reached £13,000, excluding mortgages, which takes it to record levels. Total unsecured debt in the UK in the three months to the end of September 2016 stood at £349 billion, which also is an all-time high. London has emerged as the debt capital of the country, with 1 in 5 people living in debt. This costs an estimated £1.4 billion a year.
Build Credit and Save Money by Taking a Personal Loan
The UK debt problem seems to have worsened in recent years. Partly because of the reduced working hours, and unemployment. Many individuals even have multiple debts at the same time, often ending up taking a loan from one lender to repay another. Debt consolidation can easily solve this problem.
Those with good credit usually find it easier to get a loan that will help them consolidate debt at a lower interest rate and save a lot of money. But the reality is that if you’re reading this article you’re most likely in search of ways to re-build your credit score. Even if your credit is less than ideal you can find the right lender if you know where to look.
Finding the best options can be a time-consuming process but there are websites that make it simpler by allowing you to find a reputable lender based on your credit score and personal circumstances. Deal with a single lender and make the loan more manageable, so you never fall behind the payments. Look into the offers available, consolidate your debt, pay back on time, and you can improve your credit score.
What Happens When You Miss Payments?
Every payment you miss goes into the record books. Even a late payment will bring down your credit score, which over time, impacts your creditworthiness negatively. Lenders might reject your loan application if you have a low credit score. And even if they approve the loan, you are likely to be charged a higher interest rate. On the other hand, your credit score will improve if you are able to repay the loan on time.
A personal loan is an ‘unsecured loan’, so there won’t be collateral attached to the cash advance. This may not be true for the other types of loan you have at this time.
How a Personal Loan Can Help You Improve Your Credit Score
The interest rate on a personal loan is lower than what you pay for a credit card and many other types of debt. This means that your total outflow each month will be less than before if you consolidate the debt with a personal loan. Try to pay back more than the minimum amount due every month. You will be able to get out of debt more quickly and boost your credit score. This is why personal loans are often referred to as ‘credit builder loans’.
Focus on three important things if you want the personal loan to have the maximum impact on your credit score. Maintain a positive payment history, look to lower the interest rate, and pay more than the minimum amount due. A personal loan will work for you if you adhere to these three conditions.