Unitranche Debt or personal loans represents a hybrid lending scheme which combines several loans into a single, with an adjustable interest rate fixed between the lowest and highest rates for the customer to enjoy. As such the term ‘unitranche’ is used to describe personal loans.
Units are based on different categories of credit: credit cards, bank loans, overdrafts, car loans, unsecured loans, etc. Each type of loan has a distinct set of rates and terms, designed to suit the lender and the customer.
Credit cards and cash advances tend to be secured by the value of the card itself. With an overdraft you have the risk of having overdrawn fees deducted from your account; this is especially true if you have had to miss a few payments.
An overdraft charge is also generally tied to your credit card, so if you use your credit card for purchases without paying off the balance you will incur more charges. These can result in a substantial amount of interest over the life of the loan and are often only available to those who can afford to make at least minimum repayments.
With some loans you will receive a line of credit against the amount of the loan, which may be used for emergency purchases such as emergency food or fuel, but should not be used for large purchases such as furniture or home improvements. These types of loans are commonly known as a home loan.
Another aspect of credit card debt is the possibility of a penalty if you default on payment. If you fail to make payments you can be reported to the credit bureau, and a fine imposed. As you may be tempted to fall behind on your monthly repayments if they are low, you should bear in mind that in the long run you may be better off avoiding falling behind altogether. This is because interest charges and penalties are calculated against the outstanding balance of the loan and the longer you are behind, the higher your chances of falling back into arrears.
To avoid falling into arrears, you should ensure that you only make minimum payments each month on your credit card debt, or contact your lender and ask them to reduce the interest rate to a level which suits your circumstances. There are many companies available online that can help you with this, however you must be careful about asking too many questions. Most lenders do not offer this type of debt help unless they see a proven track record of success.
Debt management is another option to consider when it comes to managing your finances. This is a means of ensuring that you are not only able to make the minimum payments on your unitranche debt but also improve your overall financial position by getting rid of any accumulated debt, taking control of your credit rating, and even planning your future finances so that you can avoid falling behind.
When considering debt management it is important to remember that debt management is not just about cutting costs but also about saving money. The key to good debt management is to set up a budget which helps to cut out unnecessary spending, reduce your monthly repayments and improve your credit rating.