Accumulating high-interest debts is hardly foreign to many of us. Credit cards and other convenient forms of loans come with one obvious caveat – they’re rather expensive to pay off. The difficulty comes in where this happens on a large scale, leaving you to juggle a variety of expensive debt repayments, with different amounts and different repayment dates. Aside from the high costs, it can cause headaches and make for stressful reading when analysing your bank statements each month.
It’s therefore no surprise to see the increasing popularity of debt consolidation loans, whereby you as a debtor acquire one single loan – with a superior APR to that of the collective debts you are currently faced with – to pay them all off, ultimately making your credit more affordable and hassle free.
Using P2P lenders for a debt consolidation loan
A common way of consolidating debt is to consult with an expert; one who specialise in negotiating a debt consolidation into one low monthly repayment to cover all your creditors. However, within the market for personal loans lies a quick and easy alternative which negates the need for any middlemen.
Peer-to-peer (P2P) lending platforms have added a new dimension to the world of consumer credit by virtue of their streamlined operations. The online business model is a simple one which automatically matches the funds of ordinary people willing to lend their money directly with those in need of a loan, and, unlike a bank, this is done on a pound-for-pound basis, with no lender capital being swallowed up by any intermediary.
The platform instead acts purely as a mediator, conducting credit checks to ensure that only creditworthy borrowers get through the door in order to minimise the risk of borrower default. For this, they charge a nominal admin fee, but that’s about where the charges end, and it therefore comes as no surprise that these online providers are able to offer loans with highly competitive APRs.
Additional benefits for the borrower also include convenience, expedience and flexibility. Applying for a loan online requires just two minutes, and the approval process takes a solitary working day. That means, if approved, you can expect the funds in your bank within 48 hours.
You can also borrow up to £25,000, which, hopefully, should be enough to cover the value of your outstanding, high-interest debt. Furthermore, you can also choose the period over which you’d like to pay the loan off – anywhere between 1 – 5 years. One other carrot is that some platforms like Lending Works even give you the chance to make overpayments or an early settlement at no extra cost.
The savings to be made are considerable too. The representative APRs of most P2P lenders typically lie somewhere between 6-7%, and, when compared to the average representative APR of 17.8% for UK credit cards (reported in UK Cards Association Quarterly Trends – Q4 2014 Report), you could be looking at hundreds or even thousands of pounds saved over the course of the loan.
Taking steps to control your debt
As with any decision involving unsecured credit, it is advisable to do your homework, read the fine print, and ensure that you feel comfortable and fully understand what the provider is offering. But there is no doubt that the formerly sterile pool of lenders, dominated by the poor value offered by banks, is a thing of the past, and peer-to-peer lending platforms are a good example of the positive change towards a more consumer-friendly and competitive credit market.
So if debt pressure is something that is weighing you down on a monthly basis, don’t be disheartened. Because, quite simply, all it takes is a bit of research and a few easy steps to regain control of your finances with a debt consolidation loan.