Tag: Personal Loan

Consolidating debt with a personal loan

consolidating debt

As well as providing a financial boost for purchases and projects, personal loans can be used to consolidate your debts. If you have multiple debts such as credit cards and other loans, consolidating them into a single monthly payment can have several advantages. Here we look at the three main benefits and what to bear in mind when you’re thinking about consolidating your debts with a personal loan.

Streamline your finances

A debt consolidation loan lets you switch all your existing borrowing on to one loan, so you only need to make one repayment each month. This can simplify and streamline your finances, helping you to keep track of what you owe.

Reduce your monthly repayments

You may be able to save money with a debt consolidation loan by finding one that charges a lower APR than you’re currently paying. This works particularly well if you have quite a few outstanding debts gathering interest and can reduce your overall monthly repayments.

Improve your credit score

It’s easier to make one repayment every month, and doing so will improve your credit score.

Consolidating debts into a personal loan can also improve your credit by lowering your credit utilisation ratio (how much of your available credit you use), which accounts for 30% of your overall credit score, and improving your credit mix.

Key considerations

Although consolidating your debts with a personal loan can simplify the debt repayment process and save you money, it won’t make your debts disappear. If you miss a repayment, it will impact your credit score and can lead to even more debt if you use newly available space on credit cards or extend the terms of your loan. You should also bear in mind that you will have to contact your existing creditors to transfer the balance of your loans (unless your lender offers this service), and this can sometimes incur a fee.

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Looking for more information on personal loans or boosting your credit score?

Personal loans

We explain how personal loans work and what to look out for when applying

Credit score

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Top tips

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Borrow from loans by mal

loans by mal offers short term, unsecured loans based on your monthly income.
Click the button to visit our loan calculator and find out how much you could borrow.

Representative 50.4% APR

Will a personal loan affect my credit score?

will a personal loan affect my credit score

Like any other form of credit, a personal loan can affect your credit score at different stages of the process. Your score may go up and down throughout the process, but for most people, you’ll end up with a higher credit score than when you started if you make all of your payments on time.

Shopping for a personal loan

When you’re shopping around to check your rate before you apply for a loan, it’s always a good idea to ask the lender what kind of credit checks they are doing. Lenders can do a soft credit pull, rather than a hard inquiry when you provide your information to see what rate you qualify for. This doesn’t get recorded as an official inquiry on your credit report, so it won’t affect your credit score. A hard enquiry can drop your credit score by a few points each time. Some lenders, including many banks and credit unions, don’t offer a soft check with pre-qualification. If you’re just comparing rates, opt for lenders like mal that offer the soft check so your credit score will remain unaffected.

Applying for a Personal Loan

When you go ahead and apply for the loan, the lender will do a more detailed credit check, known as a hard credit pull. This will get recorded on your credit report as a credit inquiry, and can lead to a credit score drop of around 5 points for most people. That’s why it’s a good idea to check your credit score before you apply for a loan, and take any steps to boost a poor credit score. Multiple applications with different lenders, particularly within a short space of time, can negatively impact your credit score. The good news is that these credit inquiries only last a short period of time. After a year they’ll stop negatively affecting your credit score, and after two years they’ll fall off your credit report entirely.

Repaying Your Personal Loan

Developing a record of consistent, on-time payments toward your debt helps build credit in the long term. Payment history is the biggest factor in your credit score, accounting for 30% of the overall score. As you make your payments, you’re most likely to see the biggest boost in your credit score. However, it’s important to make sure your repayments are on time. While missing a due date by a few days will not affect your credit, payments toward your personal loan that are more than 30 days late may be reported, and can damage your credit score. The amount you are overdue and the frequency can also lower your score.

As time passes, these late payments won’t keep your score down quite as much, especially if you make the rest of your payments on time. This is why it’s important to develop good budgeting and saving habits, and to consider putting your personal loan payments on auto-pay. If you are using your personal loan to consolidate debts, this can also help improve your credit rating.

Contact mal - consumer credit lender

Looking for more information on personal loans or boosting your credit score?

Personal loans

We explain how personal loans work and what to look out for when applying

Credit score

Everything you need to know about credit scores including how to improve yours

Top tips

Top tips from loans by mal designed to help you understand your options

Borrow from loans by mal

loans by mal offers short term, unsecured loans based on your monthly income.
Click the button to visit our loan calculator and find out how much you could borrow.

Representative 50.4% APR

What are the different kinds of personal loans?

different kinds of personal loans

Thinking about a personal loan but don’t know your fixed rate from your variable? The difference between secured or unsecured? Don’t worry, you’re not alone. Here, loans by mal takes you under a sturdy wing to guide you through the jargon.

Secured or unsecured?

Is the number one question.

A secured loan works by borrowing against the value of something you own, such as a car or a house – also known as collateral. If you can’t make your repayments, then the lender can sell your collateral to get their money back and give you what’s left. Because it’s less risky for the lender, you’ll often pay a lower rate of interest and you might get approved for a larger sum. The downside is that you could lose your home if you can’t repay your loan, plus lenders will sell to get their money back, not to get you the best price.

Unsecured loans, on the other hand, allow you to borrow without having to put up any collateral. Because there’s more risk that the lender won’t get their money back, interest rates can be higher and you might not get as much money as with a secured loan. Unsecured loans are likely to use your credit score to estimate risk to the lender.

What’s a guarantor loan?

It’s a type of loan you take out with someone else who agrees to pay your debt if you can’t. This person is called a ‘guarantor’ and they’ll usually be a friend or family member. A guarantor loan is a type of unsecured loan since neither you nor your guarantor puts up any kind of collateral.

Guarantors help reduce the risk to the lender, so they could be a good alternative

for people with a poor or limited credit history who might struggle to get a loan. Bear in mind that if your guarantor gets stuck paying off your loan, you might not be on their Christmas list.

What’s the difference between a variable interest loan and a fixed loan?

Simply put, with a fixed-rate loan the interest stays the same throughout the borrowing period, regardless of the economy or any other factor. With variable rate loans, the interest rate can go up or down depending on market conditions. This question crops up with bigger loans that you’ll be paying off for longer, like a mortgage.

With a fixed rate, you’re able to see how much you’ll pay each month and the total you’ll pay overall, which can make budgeting easier. A variable interest loan is more of a gamble – while you might benefit if interest rates drop, you’ll pay a higher rate if they rise, meaning that it can be harder to budget.

What’s a debt consolidation loan?

A debt consolidation loan rolls up all your debts into one, ideally with a lower interest rate and a speedier payoff time. Having fewer payments to juggle and saving on interest can simplify your finances and help you pay off debt. On the downside, you could end up in more debt if you go on a spending spree with freed up space on your credit cards.

What’s a payday loan?

Payday loans are short-term loans originally designed to tide people over until payday. Normally you’ll have until your next payday to pay back your loan plus interest, although these days some payday lenders will let you choose the repayment period. What all payday loans have in common is that they’re high cost, short-term, and often for small amounts. Although a payday loan can seem like a quick fix when you’re strapped for cash, they can quickly trap you in a cycle of debt if you can’t afford to pay back on time.

What’s APR?

Read our article here.

We’re not a payday loan company and you won’t need a guarantor to be approved for a loan with us. loans by mal offer unsecured loans up to 1 month’s income, helping with one-off purchases and unexpected events.

Contact mal - consumer credit lender

Looking for more information on personal loans or boosting your credit score?

Personal loans

We explain how personal loans work and what to look out for when applying

Credit score

Everything you need to know about credit scores including how to improve yours

Top tips

Top tips from loans by mal designed to help you understand your options

Borrow from loans by mal

loans by mal offers short term, unsecured loans based on your monthly income.
Click the button to visit our loan calculator and find out how much you could borrow.

Representative 50.4% APR