What is Debt Consolidation?

Debt consolidation simply means taking out a new loan to pay off your existing debts, leaving you with just one new loan to pay back every month.

Consolidating debt can make repaying what you owe more manageable by:

  • Lowering your monthly payments
  • Reducing interest rates
  • Simplifying repayments

This can provide much-needed breathing room in your budget. However, it’s critical to understand credit implications and weigh alternatives like balance transfers before pursuing debt consolidation.

What is a Debt Consolidation Loan from Barclays?

Simply put, a debt consolidation loan from Barclays allows you to combine all your different debts into one loan. This means that instead of keeping track of several payments each month, you only have to worry about one. 

It’s a bit like putting all your eggs in one basket but in a good way. It makes your financial life a lot simpler.

How Does the Process Work?

First things first, you apply for the loan. You can do this easily through Barclays’ online banking or their app – nice and straightforward. 

If Barclays approves your application, they’ll put the loan amount straight into your account. You then use this money to pay off your other debts and all you have to do is make one monthly payment back to Barclays.

How Much Do They Offer?

Barclays offers personal loans from £7,500 to £50,000. These unsecured loans can be used for anything, including consolidating and paying off multiple debts.

With a Barclays debt consolidation loan, you receive a lump sum that can clear your existing credit card, loan, and overdraft balances. You’ll then have fixed monthly repayments to Barclays over a repayment term of 2-5 years.

And if you find yourself in a position to pay it off earlier, you can – there’s no rule saying you have to stick to the full term. 

But remember, if you pay it all off at once, you’ll need to pay the full amount you owe, plus any interest that’s due up to that point.

Interest rates and eligibility vary depending on factors like your credit score. The Barclays loan calculator lets you estimate potential terms based on how much you want to borrow.

Who Can Apply?

To apply for this loan, you need to have a Barclays current account or a Barclaycard, be living in the UK, and be at least 18 years old.

Also, there are a few things you can’t use the loan for such as:

  • Business reasons
  • Investments, including buying stocks and shares
  • Timeshares
  • Purchasing property (home improvements are fine)
  • Gambling-related expenses
  • Repaying CCJs (county court judgments)
  • A purchase made by combining this loan with any others

Is it Always a Good Idea?

While consolidation can be a smart move for some, it’s not a one-size-fits-all solution. Here are the upsides and downsides to help you make an informed choice:

Pros of Barclays Consolidation Loans

– Simplification of Payments. One of the biggest advantages is the simplification of your finances. Instead of multiple payments to various creditors, you’ll only have one monthly payment to Barclays. This makes managing your finances a lot less complicated.
– Potentially Lower Interest Rates. Depending on your circumstances and the rates of your existing debts, consolidating with a Barclays loan could mean you pay a lower overall interest rate, potentially saving you money over time.
– Fixed Repayment Term. Barclays offers a clear, fixed repayment term of up to 5 years. Knowing exactly how long you’ll repay the loan can make financial planning much easier.
Early Repayment Options. If your financial situation improves, Barclays allows you to repay the loan early, either partially or in full, giving you flexibility and potentially reducing the amount of interest you pay.

Cons of Barclays Debt Consolidation Loans

– Higher Interest Rates for Some. While consolidation can lower your interest rate in some cases, for others, it might result in a higher rate, especially if your credit rating isn’t stellar.
– Longer Repayment Period. Consolidating debts might extend your overall repayment period. Even if your monthly payments are lower, you could end up paying more in total interest over a longer period.
– Fees. Be aware of any additional charges or fees associated with consolidating your debts. These could impact the overall cost-effectiveness of the loan.
– Risk of Further Debt. There’s a risk that consolidating debts might lead you to feel more financially comfortable, potentially leading to further borrowing. It’s important to maintain financial discipline to avoid falling into a cycle of debt.

It’s important to take time to weigh these pros and cons when deciding if consolidation is your best debt solution.

What Interest Rate Can You Expect from Barclays?

Barclays advertises a representative APR of 9.9% on new consolidation loans. This means at least 51% of successful applicants will receive 9.9% APR or lower.

But remember, it’s not guaranteed for everyone. In reality, approved interest rates vary greatly depending on your financial situation and credit strength. 

They will look at your whole financial picture to see how reliably you’ve paid back money in the past, how much you earn, and how much other debt you have. All this helps them figure out how risky it is to lend you money, which affects your rate.

You can use their loan calculators to estimate your potential rate. 

Clearing the Jargon

APR stands for Annual Percentage Rate. It includes not just the interest rate, but also any other charges you might have to pay.”

What Credit Score Do You Need for Barclays Loans?

Barclays doesn’t publish the minimum credit score requirements for their loans. However, you’ll almost certainly need a “good” score for the best chance of approval on competitive terms.

Generally, a good score falls from 670-960 in the UK. Here’s a table that gives the full picture of the credit score ranges in the UK:

Credit StatusExperianEquifax
Excellent961-999800 – 850781 – 850
Good881-960670 – 799721 – 850
Fair721-880580 – 669661 – 770
Poor300 – 720300 – 579300 – 660
Credit Score Ranges in the UK 2023. Source: Experian, Equifax, and TransUnion websites.

The higher your credit score, the better the interest rate you can hope to get offered by Barclays.

Poor credit scores will make getting approved difficult. If you’re worried your score isn’t high enough, there are things you can do to improve it. 

Paying bills on time, reducing the amount you owe, and not applying for new credit too often can all help boost your score.

Does Barclays Offer a Soft Credit Check Before Applying?

Yes, Barclays offers a soft credit check for those considering a loan. 

By getting a personal price quote, you can discover the loan amount and rate you might get, without it affecting your credit score. 

This feature is especially handy for Barclays’ customers with a current account or Barclaycard. Additionally, Barclays has a pre-selection process for loan applications. 

This means you can quickly check if you’re pre-selected for a loan, allowing you to see the amount you could borrow and your personal rate in just a few minutes. 

However, this pre-selection isn’t available to everyone. If you don’t qualify for pre-selection, you can always reach out to Barclays to explore other options. 

This approach ensures you can plan your finances with clarity and without any concern about harming your credit score.

Are Barclays Debt Consolidation Loans Trustworthy?

Barclays is a trusted name in banking, serving individuals and businesses worldwide. With a long history and a global presence, you can be sure they’re reliable.

Barclays stands out for its fair and transparent lending practices. They don’t charge hidden fees or penalties, and you can even choose your payment dates. This customer-centric approach makes them a trustworthy choice for debt consolidation loans.

In the UK, Barclays is regulated by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). This ensures they meet high standards of conduct and consumer protection, giving you peace of mind.

Barclays also takes responsible lending seriously. They follow the Consumer Credit Act in the UK, ensuring their lending practices are fair and don’t cause financial hardship. This responsible approach builds trust with their customers.

What If I’m Turned Down for a Loan? Debt Relief Alternatives

Barclays may reject your loan application if you are unable to verify income, if your credit score is too low, or if the consolidation loan is unaffordable for your current financial situation. 

Common reasons for loan denial include:

If you receive loan rejection from Barclays or any other lender, free-to-use debt charities can discuss alternative debt relief options including:

DMPs allow renegotiating extended repayment terms on outstanding debt obligations. IVAs work out partial debt write-offs, usually around 50%, based on what borrowers can afford to repay.

Meanwhile, the additional options provide routes to becoming legally debt-free in as little as 12 months in cases of severe financial hardship where only minimal monthly contributions are plausible.

The Bottom Line

Overall, Barclays offers a solid choice for debt consolidation loans, due to its flexible repayment terms, and transparent fees.

However, there is no universal “right” approach to debt that applies perfectly in all situations.  Careful reflection on your unique circumstances is needed, rather than simply jumping to consolidate with a Barclays loan.

Consolidation helps many people in the UK better manage problem debt every year. But for others, it risks making things worse rather than better if repayments remain unaffordable.

Seeking confidential guidance from qualified mortgage advisers allows you to make the most informed choice.

To get started, feel free to get in touch and we’ll match you with a good mortgage broker.