Paying off a number of debts can be made easier by consolidating them into easy, single monthly payments. There are different ways to consolidate loans and debts with varying terms and conditions, but for many people they can be a more affordable and less stressful way of coping with debt.

Having a number of bank loans can be a huge financial burden, with managing separate payments often being a time consuming and costly process. For many borrowers, a consolidation loan can be an easy and cost effective way to bring the debts together under one loan, with an easy to understand and management repayment schedule. Essentially, a consolidation loan will pay off your existing loans, with all the money you previously owed transferred to a single and hopefully more manageable monthly payment. There are different types of consolidation loan, so it’s important to find a type that suits your needs and your budget, and to know exactly how they work.

Managing repayments and spending

One of the first things to do with a consolidation loan is to be careful with your spending. After all of your debts have been consolidated into one monthly payment, it is important to be disciplined and stick to a planned monthly spend, so you can afford the loan repayments. Previously borrowers with a range of loans may have been only making the minimum payments, sometimes just paying the interest added to the debt rather than clearing the debt itself. But by spreading out the debt over a longer period of time, monthly payments can be reduced to a more affordable level.

Your credit rating could be helped by getting a consolidation loan. By paying off the consolidation loan without building up any further debts, it is likely this will have a beneficial effect on your overall credit rating. Loan companies use credit ratings when determining your suitability for borrowing money, and getting a good credit rating can help in the future if you need a loan. Many loans can attract a high rate of interest, especially high street store cards and credit cards, so consolidating these debts into a single loan with a lower rate of interest can save a significant amount of money. Consolidation loans typically have a lower rate of interest as they involve a larger amount of debt, repaid over a longer period of time.

Choosing the right type of consolidation loan

It’s important to understand the difference between a secured and unsecured consolidation loan. A secured loan is usually tied to an asset, normally your property. If you are considered to be a higher risk then the lender could ask that one condition of taking the consolidation loan is that your home is used as guaranteed collateral if you cannot repay the money. You should think very seriously about taking out a secured loan, as if you default on the repayments your house could be taken from you and sold to pay off the debt. If you have a choice between a secured and unsecured loan, it might be preferable to consider the unsecured loan, even if the interest rate on this is slightly higher than on a secured loan.

Debts can be consolidated in a variety of ways – there is no set type of consolidation loan. Some loan companies specialise in comprehensive loans for people with bad debts or low credit ratings. When choosing the type of consolidation that’s right for your needs, it’s best to consider the amount you need to borrow, your credit history, and how much time you’ll need to repay the debt.

It’s also important to consider that if your total debts are not particularly high, then a small short-term personal loan could be adequate for reducing your debt. Going online and looking at the features of loans can get you all the details you need on consolidating your debts. Using a web site for information on consolidation loans can save a lot of time and stress, and give you all the information on interest rates and repayment schedules to help you make a well informed decision.

Split loan deals

From Monday, HSBC will offer borrowers the option of a split loan mortgage that allows customers to fix either 25, 50 or 75 per cent of their loan, with the remaining percentage on a lifetime tracker rate. The fixed rate depends on the proportion of the mortgage that is fixed and the loan-to-value of the deal. Rates start from as low as 2.49 per cent for the 25 per cent fixed option at 70 per cent loan-to-value. The product has a £999 fee and is available to customers borrowing up to £500,000.

“The rates on offer look very good,” said David Hollingworth of London & Country Mortgage Brokers.

Mortgage brokers point out that many other lenders will allow borrowers to mix and match products and specify the split between fix and tracker. “However, you do need to watch out for the fees charged and check whether a fee is payable on each element of the loan,” said Hollingworth.

Switch and fix deals

Otherwise known as a “drop-lock” mortgage, these products allow borrowers to take out a tracker rate but then move on to a fixed-rate deal – with the same lender – without any early repayment charges.

Nationwide Building Society and Royal Bank of Scotland (RBS) are among the few mortgage providers that currently offer the switch-and-fix option. However, Nationwide charges a reservation fee for the new fixed rate while RBS allows customers to switch free of charge provided they have been on the tracker for at least three months.

Nationwide has a two-year tracker at 2.68 per cent – bank rate plus 2.18 per cent – available up to 70 per cent loan-to-value. RBS has a two-year tracker at 2.59 per cent – bank rate plus 2.09 per cent – at up to 60 per cent loan-to-value.

The potential downside is that the lender’s fixed rates are likely to have risen by the time the borrower decides to switch.

Capped rate mortgages

A capped rate mortgage is another option that limits a borrower’s exposure to rising rates. Capped rates cannot climb above a pre-set rate, known as a cap.

Brokers recommend a capped rate for about five years. Britannia/Co-op has a five-year deal at 2.99 per cent – bank base rate plus 2.49 per cent – with a cap of 5.99 per cent available up to 75 per cent loan-to-value. It comes with a £999 fee.

“The best five-year tracker rate at 75 per cent loan-to-value is 2.84 per cent from ING so a borrower will not pay much of a premium – just 0.15 per cent – to have the security of the cap,” said Nigel Bedford of Largemortgageloans.com.

Interest rate insurance policy

RateGuard is an insurance policy offered by insurer MarketGuard that pays out a monthly sum if rates rise above a certain amount.

Premiums are set according to the size of the mortgage and the rate insured. For example, protecting a £500,000 repayment tracker mortgage against a rate rise of more than 1 per cent costs £193 per month with a two-year policy. This drops to £55 per month if the policyholder wants to protect the same mortgage against a rise of more than 3 per cent.

Brokers warn this option is likely to be the most expensive

After applying for the loan, I received a call from their call centre, they got me through some security and then told me the loan was approved and I had to go online to complete the application. I went online there was a PDF agreement that you could download and submit to the branch with my signature or there was a the option to click two boxes and hit submit, the first box was to agree to the terms and conditions of the loans and the second box was your electronic signature. I clicked both boxes with a tick and hit submit.  The message appeared ‘your application is complete , your funds have been deposited in your account’, wow this was very efficient. I immediately paid of the balance of the Credit Card. I will have to wait 48 hours before the credit card balance shows zero. Now the important part is to make sure I don’t use the credit card, well I have not used it for more than a year now, fingers crossed, I will not need to.

The interest on the loan was 21% Apr, it was still worth it as it works out to less than 21% as the total amount payable in 12 months was about 11% more than the actual loan.  Only yesterday I realised that Apr on a personal debt consolidation loan was calculated on a sliding scale, I felt that was very fair.

Banks were known before to not want to give you loans to clear your own debts with the bank as this normally meant they would make less money.

Also I noticed my new debit card that just arrived does not have Meps or Maestro on it but just Visa, this is going to be far more convenient especially if you travel alot abroad where maestro and mebs debit cards are not accepted over the counter but only on certain cash machines. What I am not too sure is whether, the  £1.75 charge on the old debit card will have a similar charge on the Visa card, also will there be interest charged when as per using a credit card when abroad.

The interest rates will remain hign even though the bank of england base lending rate has fallen, the main reason is people tend to stop paying unsecured loans the moment.

Taxpayers are angered by the rates especially since the taxpayers money was used to bail out the banks and their money is now being lent to them a extremely high interest rates.

Debt consolidation with personal loans are still a cheaper option if you only pay the minimum on your credit cards each month. However the only way it will work effectively if you get rid of the credit card completely, is by closing the account, not just cutting the card up. Cutting it up only means if you are a credit card junkie, when you feel there is a need for the card, you will call up the credit card company and get a replacement. Before you know it, you will have to service the loan and the credit card, which will inevitably mean an additional payment.

This pattern can eventually lead to you missing payments, messing up your credit rating and in case you loose your job or you have a drop in your business, it will ultimately mean you might become insolvent and if you do own any property, you can end up lossing it as well.

Personal Loans

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We can tailor our Personal loans to meet your needs. So, why not find out the rate we can offer you by using our instant Personal Loan application. Apply online today and your money could be in your HSBC Bank current account straight away.*

With Cashback from HSBC, we’ll refund 10% of the interest you have paid on the loan when you complete your loan repayments. This offer only applies to loans with more than 24 scheduled repayments and will not apply if the loan is repaid early by you or terminated by us. Based on a £7,000 loan over 36 months, Cashback reduces our 8.7% APR typical rate for car purchase or home improvements to an equivalent rate of 7.9% p.a.
The essentials8.7% APR typical for Personal Loans between £7,000 and £25,000 where the loan is for car purchase or home improvements.
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Halifax Unsecured Personal Loans

For an online loan of between £7,000 – £25,000, a Halifax Unsecured Personal Loan could be the answer. Use our loan calculator to find out how much you can borrow, then apply online for an instant personal loan. Personal Loans are available to both new and existing customers.

Product Benefits

8.9% APR typical for online loans
Personal loan rates – from 7.9% APR to 21.9% APR depending on your circumstances
Personal loan amounts – from £7,000 to £25,000
Repayment terms – from 2 to 7 years
Affordable monthly repayments – fixed for the life of your loan
No monthly repayments for the first 3 months – although interest is charged from the start of your loan
For key information on our Halifax Personal Loan – click here

For personal loans from £1,000 to £6,999 we also offer a Halifax Smaller Loan

Next Steps
Apply for a Halifax Personal Loan online.
Use the calculator on the right to see how much your personal loan rates and repayments could be.

Important information

Loans are provided by Bank of Scotland plc. Halifax is a division of Bank of Scotland plc. Registered in Scotland number SC327000. Registered Office: The Mound, Edinburgh, EH1 1YZ. Written quotations are available on request.

For instant personal loans, funds are transferred upon receipt of your signed loan documentation. Loan funds can be transferred into a Halifax Current Account within 24 hours, transfers to bank accounts can take up to three days to clear from date of transfer.

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You find yourself a bit short of cash – an unexpected bill crops up – or there’s something you want to buy. Just fill in our secure online application form – and press the button.

Our system searches many loan providers, and within minutes one generally offers you the loan you want. Once you confirm acceptance of the terms, your loan is deposited directly into your account – often on the same day you apply

On your next payday the repayment (loan amount plus lender’s charges) is taken from your direct debit card.

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