When you apply for a debt consolidation loan you will be asked to provide a list of all your existing loans and charges. Once your loan has been approved Wave Community Bank will then make payments directly to the creditors so you won’t need to deal with them.

By consolidating your debts into one loan, you could reduce your monthly payments or decrease the amount of interest you are paying or both! A debt consolidation loan could help you schedule your repayments into a single manageable repayment each month which simplifies your finances and can help with budgeting. The fixed repayment schedule means you know exactly how much you are repaying each month. There won’t be any fluctuations in the amount you repay for the life of the loan.

The aim is to reduce the interest you are paying so if you consolidate your overdraft which is generally charged at 35-40% APR and credit card debt which averages at 22.2% (Bank of England, Oct 2023) you want to find a debt consolidation loan charging less interest than these other forms of credit. The interest charged on a debt consolidation loan will be based on your individual circumstances and affordability.

You will save money on the interest when you consolidate our debts into one loan. This is because you are only paying one set of interest rates and not many creditors. The amount of money you will save is dependent on the interest rate of the loans you have.

The lender you apply to for a debt consolidation loan will do a hard credit search which will impact on your credit score but, according to Experian, the decrease is normally less than 5 points. If you continue to meet your credit commitments, your score will recover within a few months. If you miss payments on your loan this will show on your credit file and have a negative impact on your credit score.

Consolidating debt doesn’t mean you are debt free and it won’t stop you getting into more debt. If you have lived beyond your means before and have built up the debt you are seeking to consolidate, it is wise to take the time to set yourself a realistic budget to stick to when you consolidate your debts, to help you change your spending habits and prevent you going into unmanageable debt again.

Some lenders can charge you fees for debt consolidation such as balance transfer fees. Wave Community Bank doesn’t charge any fees. If you are looking for a debt consolidation loan, do your research and make sure you know exactly what you are paying.

An unsecured debt is not linked to your home. Some lenders may ask you to secure a debt consolidation loan against your home if you are a home owner and the debt is a large amount. Find out more about the difference here.

If you have missed payments, defaults, CCJs or insolvency (IVA or bankruptcy) your credit file will be affected. This will mean your debt consolidation offer could be at a higher interest rate with some lenders. Make sure you aren’t paying more interest when you consolidate your debts. Wave Community Bank will only ever offer a debt consolidation loan that will put you in a better position financially.

Some debt management companies advertise ‘government debt consolidation’ but in reality there Is no such thing. These adverts misled people into thinking these debt consolidation services are free or official. In reality these companies charge a fee to provide the same debt management services that are available from charities like Step Change. The only government-related ways to deal with debts are the formal debt solutions including bankruptcy, Debt Relief Orders (DROs), and Individual Voluntary Arrangements (IVAs). The FCA are taking action against some of these companies to stop this type of advertising. Find out more here https://www.stepchange.org/debt-info/government-debt-consolidation.aspx