How to consolidate business and personal debts the right way?

Debt consolidation is a loan that an individual or a business takes to consolidate some debts to achieve a higher life goal.  For example, if you are a business owner, consider this:

“You operate in the pharmaceutical industry as a drug manufacturer. The previous years have been great from a growth perspective due to potential investments. To counter material shortages, you hire individuals and contacted suppliers. The cost of which was far more than you thought. You took a business loan to cover the cost and continue to scale through unrestricted production.

 With recurring access to the material needed to produce healthcare-related stuff, you accomplish profit margins. As a result, you end up exhausting the available capital reserve. But now, you wish to expand your business in other markets with liabilities to pay.  You need to pay the business loans that you took to catalyse the process. But if you do so one by one, you may miss the growth opportunity.

Here, to pay off debts and implement the next big strategy, you can consider a debt consolidation loan. It helps you clear debts in one lump sum every month. It relieves you of dealing with so many loan providers amid expansion efforts. Moreover, by consolidating, you can use the rest amount in your expansion goals.”

It is just an instance of how debt consolidation help deals with capital constraints that obstruct business expansion and growth and help a business trade on the opportunity hassle-free.

What is a debt consolidation loan?

A debt consolidation loan is a facility that allows a person or a business to merge the outstanding loan balance into one lump sum. It is also a loan that one needs to repay in installments. It is both secured and unsecured. The loan is ideal for one who needs to achieve a higher goal in life like- applying for a mortgage, home renovation, business expansion, or establishment.

One can qualify for these loans with both good and poor credit scores. However, the interest rates may vary. By consolidating high-interest loans, one can fetch a better-rate loan and deal with only a lender.  Precisely, a debt consolidation loan helps you release the money clocked in other loans and use it to achieve other life goals.

Can you get consolidate debt at poor credit? Does it require a guarantor?

Yes, whether you are a business or an individual, you can get a debt consolidation loan even with a low credit score. Past credit mistakes like CCJ, loan defaults, and bankruptcy may impact the loan terms that you get. Usually, individuals with good credit histories can get a debt consolidation loan without many obstacles.  There are only limited lenders that help bad credit individuals consolidate debts.

We are one of those lenders that help you consolidate debt even if you have a low credit history. However, the interest rates may be competitive for unsecured debt consolidation loans.  We determine the same by analysing your affordability. Based on this, you can either opt for a secured or unsecured debt consolidation loan.

No, we do not ask for a guarantor on unsecured debt consolidation if:

• You have a regular income/ flourishing business
• Your payment history does not reveal major debts
• You have not applied for a mortgage lately
• Your income or revenue can sufficiently pay off the unsecured loan balance

If you meet the criteria, you may get a debt consolidation loan in the UK with no guarantor facility. A guarantor is needed when you cannot afford the loan alone.

A guarantor can be a business partner or family member that can help you assist your life goals with stable finances and credit score. If you want to go with a guarantor, we have options for that too.

What is the best route to consolidate business and personal debts?

There are different reasons to consolidate debts. Each person’s priorities differ. So, whether you are self-employed, employed or a businessman, merging debts the profitable way may help you achieve your goals. Here is something you should consider while consolidating business or personal debts

Consolidating debts as an individual	Consolidating business debts
Take a closer look at your finances and review your debts.	Take a closer look at your finances and review your debts.
Create a budget for your next big life moment like- a car purchase, or home re-construction. Will debt consolidation benefit you?	Create a budget for your next big life moment like- expansion, HR development, or product launch.Will debt consolidation benefit you?
Research the best loan terms, interest rates, APR, and repayment terms and collateral required	Research the best loan terms, interest rates, APR, repayment terms, and personal guarantees required

A debt consolidation loan is ideal as it:

• helps you lower your liabilities
• Improve your credit score
• Make it convenient for you to make payments

Best ways to consolidate your business and personal debt

Now, that you know the best times to consolidate your business and personal loans, you must be eager to know the process.  Here is how you can do that:

1) Identify the debts to consolidate

It is important to check the debts that cost you more every month. You can consolidate loans like- business loans, no guarantor loans, student loans, payday loans, equipment financing, etc., Apart from that, check the loan closure date, pending amount, interest rate, and maturity date of loans before consolidating.

2) Check prepayment penalties

Prepayment penalties can make the loan costlier than what it is. It implies paying a debt consolidation loan before the maturity date may lead to additional penalties.

However, we do not charge a pre-payment penalty on loans. We understand that individuals with poor credit history struggle improving credit score and hence avoid it. But, you should check whether any loan you have has a pre-payment penalty or not. If yes, paying it would impact your credit history.

For example, you need bad credit business loans from a direct lender to update inventory, if you consolidate a loan with a pre-payment penalty, it may downgrade your credit score. Thus, to ensure the most affordable bad credit business loan, consolidate debts that lack pre-payment charges. It would not impact your credit score then. Or you can pay the pre-payment penalty before consolidating the loan.

3) Calculate the average loan repayment and consolidate

While applying for debt consolidation, always check APR. It is the annualised cost of the loan that includes all loan fees. You pay more on a high APR loan. Calculate the total amount and compare your options. It will help you consolidate right.

Bottom line

So, this is how you can consolidate your business and personal debts without hurting your credit score. Consolidation is the best way to reduce excessive debt and scale up without cash constraints.