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What is a debt consolidation loan?
A debt consolidation loan is where you take out a loan to pay off existing debts. So in effect you are lumping together all your existing debts, clearing them with a debt consolidation loan and then making just one payment a month to clear the outstanding balance.You may find that you save money too, as taking out a 9% APR loan to clear a credit card with a balance accruing interest at 16.5% APR makes sense. There is also the psychological factor of only having one monthly repayment to manage rather than lots.
What is a loan broker?
A loan broker is someone who searches the marketplace for the most suitable loan for an individual. A loan broker works as an intermediary between the customer and a loan provider. He will recommend and arranges the loan on behalf of the client. Some brokers charge an arrangement fee for this service.
What is an arrangement fee?
An arrangement fee is something that is charged by a lender or broker when you take out borrowing such as a loan or mortgage. It is to cover their costs in arranging the lending. Some lenders will offer this free of charge in order to attract new customers.
What is a credit record?
A credit record is basically a record of all the credit you have had in the last six years. It shows how much you have borrowed and whether you have missed any repayments etc. A credit record allows potential lenders to see your financial history so that they can decide whether to lend you money.The data on your file is complied by credit reference agencies such as Equifax and Experian. They use information from public records (e.g. electoral roll information, court judgments etc) and from lenders and financial institutions: e.g. credit accounts, credit applications).
What is a bad debt?
A bad debt is borrowing where the money has not been paid back subject to the terms and conditions of the lending agreement. A debt tends to become ‘bad’ where it is unlikely that the creditor will be able to recover the money.Having a bad debt on your credit file will make it harder for you to borrow money in future.