Should I switch to a cheaper loan?
If you’re currently paying interest on loans, credit cards or an overdraft, you might be able to save money by switching to a loan with a lower APR. This could reduce your monthly repayments, making them more manageable. To help you decide whether switching to a cheaper loan is right for you, here’s what you need to know before you go ahead.
If you are thinking of consolidating existing borrowing you should be aware that you may be extending the term of the debt and increasing the total amount you repay.
First, you need to find out if you’re eligible. You can do this quickly and easily by using a soft search loan eligibility checker. When checking your eligibility for a debt consolidation loan, you’ll need to know how much to borrow to pay off your existing debts. This could be for just one loan or credit card, or multiple.
If you are eligible for a debt consolidation loan, you’ll see one or more options in your search results. You can then check your options to see if the APR is lower than what you’re currently paying. If it is, the next step is to weigh up whether it’ll better for you to switch.
When you check your eligibility for a loan, the APR you’re offered is based on your credit history and personal circumstances. If you’ve been consistently making your loan repayments for a while now, this might have improved your credit score. This means that you could be offered a better rate than when you initially took out your loan.
If you’re thinking of paying off a credit card or overdraft, you might simply find the rate you’re offered with a debt consolidation loan is lower than what you’re currently paying. What’s more, if you make your monthly repayments until then end of your term, you will have actively paid off your what you owe.
If you’re eligible for a cheaper loan, there are some clear potential benefits of paying off your other debts.
As with any financial decision, there are a couple of things to consider before you proceed.
If you’re struggling to make your credit card repayments, you could also consider a balance transfer credit card. This allows you to transfer the balance from your current credit card (usually for a fee), to a credit card that has 0% interest introductory offer – for example 0% APR for four months. This means that you won’t be charged interest on the balance of the credit card for the first four months of you owning the card.
This could give you the breathing space you need to pay off what you owe during the four months without your debt increasing. However, it’s important to note that you will be charged the credit card’s interest rate on the entire balance once the offer ends.
If you think you could save money by switching to a debt consolidation loan, you can check if you’re eligible now without harming your credit score.
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