It’s not uncommon to be paying off more than one debt at a time. You may have a credit card and a car loan, for example. But, debts can pile up quickly, and it can become difficult to juggle your repayments.
Are you in a situation where you are paying more than one loan, and it has become stressful to manage?
You can make your life easier by applying for a debt consolidation loan.
Debt consolidation is the process of bringing all of your existing debts together into one new debt. Debts that can be consolidated include (but are not limited to) personal loans, credit card balances, overdrafts and store cards.
The purpose of a consolidation loan is to pay out your existing debts, streamline your repayments into a single periodic payment, and give you a clearer picture of your finances.
When you get in touch with a consolidation company, they will go over your financial situation in great detail to ensure they can offer you the best product for your unique needs.
Information required will include a list of your current debts, including the amount owing, the interest rates for each debt, and other details such as your income and expenses.
Once your financial advisor has a good understanding of your finances, you’ll be able to discuss what amount you can afford to repay each week, fortnight or month (you can choose your repayment frequency – it can be useful to schedule these to coincide with your income paydays so that your loan repayment can be made straight away).
With your financial advisor, you can research loans available and their interest rates. The goal is to secure a lower interest rate than what you are currently paying (on average) across your current debts.
Once the most suitable loan has been chosen, your debt consolidation company will help you apply for the loan.
There are a number of circumstances that may lead an individual to benefit from applying for a debt consolidation loan, such as:
The benefits of consolidating multiple debts into a single loan include a lower interest rate, a more manageable way to repay your debt, a definite date of when your debt will be repaid, and the removal of the potential to accumulate more debt.
Debt consolidation loans don’t have a credit facility. You have one single sum to repay, and your repayment amount will remain the same for the duration of the loan.
By making consistent on-time repayments, debt consolidation can also improve your credit rating.