If you are struggling to keep track of multiple monthly repayments for your debts, a debt consolidation loan may be the perfect solution to your problem. This enables you to group all your debts together in a single monthly repayment, helping to streamline your finances. Here’s what you need to know about debt consolidation loans and how to apply.
Basically, a debt consolidation loan is money that you borrow to pay off your existing debts, like credit cards, auto loans and other personal debt. Once you have activated your debt consolidation loan, you’ll still owe the same amount of money overall but you’ll only need to make one repayment each month instead of several.
Using this method, you may be able to save a lot of money on interest payments over the life of the loan. This is because debt consolidation loans typically have lower interest rates than credit cards do. Even a difference of just 1 per cent can add up to big savings over time.
Before you can apply for a debt consolidation loan, you need to evaluate your current debts. Make a list of all your accounts, including the following information:
• Name of bank
• Account number
• Amount you owe
• Interest rate
• Monthly repayment amount
You’ll need all of this information when it comes time to process your loan application. If any of your accounts have exit fees or break costs, make note of these as well. Not all accounts have these fees, so check with your bank if you are unsure.
Take some time to figure out how much you can afford to put towards your debt each month, taking into consideration all of your other financial obligations like rent or home loan repayments, utility bills, food expenses and other necessities. Be realistic about your financial capabilities to avoid putting yourself at risk of a monthly repayment that is too high.
Your monthly debt budget will determine the length of your debt consolidation loan as well as the interest rate. In general, shorter loan terms qualify for lower interest rates, so be sure to take this into consideration. Also, the longer your loan term, the more you will pay in interest over the life of the loan.
Don’t just blindly go with the first bank that makes you an offer; take the time to research several institutions so you can find the most favourable rates. In addition to interest rates, loan initiation fees vary widely from bank to bank. Be sure to factor this into your decision as well. Don’t make your decision based solely on one factor. Try to see the big picture to find the best option overall.
If you would like assistance in determining the best debt consolidation loan for you, the experts here at Debt Negotiators can help. We are proud to offer free financial advice to help you make sound decisions about your money.
Get in touch with us today to get started.