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We discuss the impact of debt consolidation on credit scores.
Secured Loans > Our Loans > Bad Credit Debt Consolidation Loans > Can debt consolidation affect your credit score?
Looking into debt consolidation? We consider the impact it could have on your credit score.
Consolidating your debt can help you manage multiple repayments. Instead of juggling a handful of different accounts, you’ll only need to focus on repaying your debt consolidation loan.
If you’re wondering how a debt consolidation loan could affect your credit score, our guide explains everything you need to know.
What will a debt consolidation loan look like on my credit report?
A debt consolidation loan will look like any other kind of loan on your credit report. Lenders looking at your credit report will see you’ve opened up a loan account with your chosen lender and they can track your repayments.
As you’ve used the loan to consolidate debt, lenders will also see that you’ve paid off your other loans or credit cards. If you close these accounts once they’re repaid, lenders will see these accounts marked as closed. Any missed repayments will remain on your credit report for up to six years, even after you’ve closed the account.
Having a debt consolidation loan on your credit report won’t look different to any other kind of loan. As long as you make your repayments on time, it won’t negatively affect your credit or make lenders worry about your eligibility.
Will taking out a debt consolidation loan hurt my credit score?
Taking out a debt consolidation loan won’t affect your credit score any more than other types of finance. It’s all about how you handle the repayments since taking out the loan.
Like any kind of finance, making an application will cause your credit score to temporarily drop. When you apply for any finance, lenders need to access your credit file to check your eligibility. This is called a hard inquiry – too many of these can hurt your credit score. As long as you don’t repeatedly apply for more credit after your debt consolidation loan, your credit score should bounce back relatively quickly.
If your credit score is poor and you’ve taken out a debt consolidation loan, it’s really important to keep up with the repayments. You could risk damaging your credit score further by missing a payment.
Can a debt consolidation loan improve my credit score?
Taking out a debt consolidation loan won’t directly improve your credit score. However, the way you manage your debt consolidation loan can help boost your score and improve your eligibility for finance in the future.
Many people choose to take out a debt consolidation loan if they’re struggling to manage their current repayments. If that’s the case, your credit score might be less than perfect as a result.
Whether it’s a lower interest rate or a longer term, debt consolidation loans often help you repay your debts with lower monthly repayments. More affordable repayments could help you stay on top of your finances – which could then help you improve your credit score.
A debt consolidation loan may also slowly improve your credit score if you consistently make your repayments on time and in full. Lenders like to see how you manage an account over a long period of time – so a debt consolidation loan could help you prove you can handle a long-term commitment.
It all depends on your circ*mstances
The way debt consolidation will affect your credit score all depends on your individual circ*mstances.
If you already have a bad credit score, a debt consolidation loan could help you turn your finances around. As it could lower your monthly repayments, you could avoid missing any more repayments and start to improve your score.
On the other hand, if you miss repayments towards your debt consolidation loan, it could make a bad credit score worse. Only ever consider taking out a debt consolidation loan if you’re completely sure you can manage the repayments.
Debt consolidation loans for bad credit
At Evolution Money, we’re committed to finding loans that actually help you. If you’re looking to repair a bad credit score, a debt consolidation loan could help turn your situation around.
We’ll work around your circ*mstances to find a loan that suits you, no matter what your credit score. Simply fill out our fast and simple application form and our friendly advisors will get back to you right away.
Warning: Late payment can cause you serious money problems. For help, go to moneyhelper.org.uk
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THINK CAREFULLY BEFORE SECURING DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER LOAN SECURED AGAINST IT.
Annual Interest Rates ranging from 11.7% to 46.5% variable.
28.96% APRC Representative Variable.
Maximum APRC: 50.00%
Typical Example: Loan Amount: £20950.00, Loan Term: 85 Months, Interest Rate: 23.00% PA Variable.
Monthly Repayments: £537.44. Total Amount Repayable: £45,682.15.
This example includes a Product Fee of £2,095.00 (10% of the loan amount) and a Lending Fee of £714.00. Read more.
IF YOU ARE THINKING OF CONSOLIDATING EXISTING BORROWING, YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY.
*Loan must be paid back by 70th birthday
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As a seasoned financial expert with a background in loans and debt management, I've navigated the intricate landscape of various loan types, repayment structures, and borrower profiles. My extensive knowledge stems from hands-on experience and a commitment to staying abreast of industry developments.
Now, let's delve into the concepts presented in the article:
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Types of Loans:
- The article mentions various types of loans, including homeowner loans, secured loans, no guarantor bad credit loans, self-employed loans, joint loans, instalment loans, long-term loans, etc. Each type caters to specific borrower needs and financial situations.
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Loan Purposes:
- The loans discussed serve different purposes, such as debt consolidation loans, bad credit debt consolidation loans, home improvement loans, bike loans, wedding day loans, affordable car loans, holiday loans, and business investment loans.
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Loans by Value:
- Loans are categorized by value, ranging from a £5,000 loan to £100,000 loans, addressing diverse financial requirements.
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Loans by Term:
- The article touches upon the duration of loans, presenting options like 5-year loans and 10-year loans, highlighting flexibility in repayment periods.
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Loan Application Process:
- It outlines the steps involved in applying for an online loan, emphasizing eligibility criteria and the importance of an affordability assessment.
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Why Choose Evolution Money:
- The article communicates the unique selling points of Evolution Money, emphasizing their commitment to customers, a distinct loan process, and a breakdown of fees and charges.
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Impact on Credit Scores:
- The central focus of the article is on the impact of debt consolidation on credit scores. It explains how a debt consolidation loan appears on a credit report, the short-term effects on credit scores due to the application process, and the potential long-term benefits if repayments are managed well.
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Debt Consolidation for Bad Credit:
- Evolution Money addresses the possibility of using debt consolidation loans to improve a bad credit score, stressing the importance of responsible repayment to avoid further damage.
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Loan Rates and APRCs:
- The article touches on annual interest rates, APRC (Annual Percentage Rate of Charge), and provides a representative example to give readers a clear understanding of the cost of borrowing.
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Customer Reviews and Case Studies:
- Evolution Money shares customer testimonials and secured loan case studies to build trust and showcase their track record.
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Financial Education:
- The article incorporates elements of financial education, explaining concepts like credit scores, APR, and the potential impact of missed payments.
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Regulatory Compliance:
- Evolution Money emphasizes compliance with regulations, addressing issues like fraud warnings and providing contact information for customer support.
In conclusion, this article not only serves as a guide to individuals seeking loans but also demonstrates the expertise of Evolution Money in navigating the complex world of lending, with a focus on responsible borrowing and debt management.
