Debt Consolidation

Are you struggling to pay off a range of debts?

If you are struggling to pay off a range of debts with different repayment dates and interest rates, then debt consolidation may be an excellent option for simplifying your finances, getting back on your feet and reducing your overall monthly payments.

What is Debt Consolidation?

To consolidate debt means to roll all your debts into one single debt amount. So instead of paying multiple amounts with varying interest rates on different dates each month, you’ll pay a single amount, once a month, with a single interest rate.

You can consolidate a range of different types of debts from credit card debts to other repayments and loans such as furniture or equipment payments, ATO debts, home loans and more.

Is Debt Consolidation Right for Me?

Consolidating your debt is a huge financial decision that shouldn’t be made lightly. You need to weigh-up your current financial situation and identify what options are available and what would suit your financial situation best.

Debt Negotiators can help. We can help you assess your financial situation for free, develop a budget and identify the best way forward including whether debt consolidation is right for you. Our expert independent consultants can offer impartial guidance using their in-depth knowledge of the law, debt processes and options.

What are the benefits of Debt Consolidation?

The benefits of a debt consolidation loan, if done correctly, will result in some significant benefits:

  • Simplify your finances

  • One loan to one creditor

  • Lower monthly repayments

  • Lower interest rates

What is a Consolidation Loan?

A consolidation loan is a single loan which combines multiple debts into one, in other words, you roll all your debts into a single loan amount. This would mean you have one debt to pay, at a single interest rate, with a fixed payment term. A debt consolidation loan can be used to consolidate multiple credit card debts as well as other repayments and loans, making repayments easier and simpler to manage.

The benefits of the right debt consolidation loan are:

  1. One affordable loan repayment
  2. Potentially lower interest rates
  3. A fixed payment term for your loan

There are two types of debt consolidation loans:

  • Secured debt consolidation loans are when you secure the loan with an asset, such as your house or car.
  • Unsecured debt consolidation loans require no assets as security for defaulting on the loan. They are therefore harder to apply for.

How does Debt Consolidation Work?

Debt consolidation, or combining your debts, allows you to take out a single loan to replace multiple debts. Your individual debts will be paid off, and you’ll have one single loan to repay. If done properly, you should benefit from having a new lower monthly repayment and a lower, singular interest rate.

To get started, make a list of each debt, along with the payment term, repayment rate and interest rates. Then you need to calculate the total value of the debts you’d like to consolidate. To make sure you get a better interest rate than you are paying, calculate the average interest rate of all your debts (add up the interest rates and then divide them by the number of debts to get an average). Once you know the amount, you can shop around for the best debt consolidation loan by seeing which ones offer the best terms. Depending on your situation you may be looking for the lowest interest rate, or you may need a longer payment term to make payments more affordable.

When is a debt consolidation loan a good idea?

A debt consolidation loan is a good idea when:

  • The bills just keep rolling in and you’re struggling to keep track of them all
  • You are paying very high interest rates (credit cards, in particular, have high-interest rates)
  • You are struggling to keep up with all your repayments and bills
  • You have a stable source of income as you’ll need to commit to making the repayments each month
  • You have created a budget and know how much you can afford to pay each month
  • You are able to avoid getting into the same debt situation again.

For the debt consolidation loan to work, you need to be able to identify what spending behaviours led to your current situation and work on changing that behaviour so you don’t land up back here again. Remember, a debt consolidation loan is not a line of credit, you cannot reuse the money you have paid off as with a credit card. If you use a consolidation loan to pay off your credit cards, it’s up to you to not run them up again. If this is going to be an issue for you, then consider closing the accounts.

What are the disadvantages of a debt consolidation loan?

There are a few potential disadvantages of a debt consolidation loan.

  • You could end up paying more, even with a lower interest rate and lower monthly repayments. To make sure you come out with a better outcome, calculate the full value of the consolidation loan and compare it to your current situation.
  • If your new debt is very large it could harm your credit rating by being seen as a major risk.
  • However, using less credit than you are eligible for and showing consistent, responsible behaviour could ensure your credit rating isn’t harmed.
  • Using a secured debt consolidation loan, such as a home loan or refinancing, to replace your unsecured debts, such as credit card debt, could result in the loss of your home if you default on payments.
  • If you don’t change your financial behaviour, and use of credit and debt, you could land up in a worse position than you started with. A consolidation loan will only work if you are willing to change the spending behaviour that got you into the situation in the first place and learn to manage your finances better.

Does debt consolidation hurt your credit score?

Generally, debt consolidation won’t immediately affect your credit score. However, if you maintain your repayments, it can have a positive effect over time. Only apply for a loan if you are relatively sure you will be successful because having multiple loans rejected can have a negative impact on your credit score.

How long does debt consolidation stay on your credit report?

Your credit report will contain information on your credit cards, arrears brought up to date, your credit applications, debt agreements, credit liability (information about credit accounts), repayment history, your defaults and other credit infringements as well as a few other details. It will not contain information about utility bills such as electricity unless you have defaulted on an amount of over $150 for more than 60 days. Different data stays on your credit report for different time periods.

  • Repayment history stays on your report for two years.
  • Your credit liabilities (such as debt consolidation loans) will stay on your account for the loan period plus two years (basically for two years after the loan is terminated or ceases to exist).
  • Credit enquiries, overdue accounts, writs and summons, and court judgements stay on your report for five years.
  • Serious credit infringements, such as a clearout (when a lender has not been able to contact you even though they tried to) will remain on your credit report for 7 years.

What are the alternatives to debt consolidation?

There are a few alternatives to debt consolidation available if this option doesn’t work for you.

The best option will always be smarter management of your finances. However, if your repayments have become unmanageable, you have a few options to consider such as:

What types of debts can be consolidated?

The following debts can be consolidated:

Will I Get Approved for a Debt Consolidation Loan?

Bad credit can impact your future credit applications. This may make you worry about whether this impacts your opportunities to resolve your debt. Although it can happen, it is rare to have a debt consolidation loan application rejected, even if you have bad debt. However, the terms of your loan such as the consolidation loan amount, costs, and interest rates, may vary depending on your current circumstances.

Use our debt consolidation calculators to help you calculate your potential loan repayments and savings.

Can I get a debt consolidation loan with bad credit?

Quite often, when you have bad debt, you have a bad credit rating and may be worried about how this impacts your opportunities to resolve your debt. It’s rare for an application for a debt consolidation loan to be rejected, even with a bad credit rating. However, it can happen. The consolidation loan amount, costs, rates, and terms will vary depending on your current circumstances. Talk to our team to see what your options are.

A surprising benefit of consolidating your debt is the possibility that your credit rating can improve. How so? When you consolidate, you pay off the individual loans and take out a new loan. By paying off the individual loans, your credit rating indicates you’ve improved your debt situation. The challenge here will be to make sure you don’t default on the new consolidated loan, as this will negate the benefit you’ve gained from paying the smaller loans off.

How much does a consolidation loan cost?

To help you assess your situation and estimate the potential repayments on a debt consolidation loan, use our debt consolidation calculator. The calculator will help you work out the loan value as well as provide possible repayment amounts including interest over the repayment period, repayment dates, and more, so you can make a decision regarding your consolidation loan.

How much consolidation loan can I get?

The amount of credit you are able to loan will depend greatly on your current financial situation and your credit rating. Contact us to help you identify how much you’ll be able to lend.

What are the rates for a consolidation loan?

The interest rates applicable to your consolidation loan will depend greatly on your credit rating and the lenders. Contact us to help you identify what interest rates are available for you.

What do debt consolidation companies do?

Debt Consolidation companies offer services to help you manage your debts and, in some cases, to consolidate or roll all your debts into one. Not all debt companies are equal and they can offer many different services. There are both not-for-profit and for-profit debt consolidation companies. Make sure the company you pick is a reputable and accredited one.

Debt consolidation companies in Australia offer a range of general financial guidance and support including information on managing your finances, how to improve your credit rating, options for getting out of debt and more.

A good debt consolidation company will offer the following services:

  • a review of your current personal circumstances to ensure support is tailored to your personal situation
  • financial guidance about your best options that have been tailored to your needs
  • a debt management plan to help you get out of debt based on your income, budget and what repayments you can reasonably afford to pay
  • negotiation with your current creditors to negotiate the terms of your debt with them
  • help you consolidate your debts into a consolidation loan
  • develop a repayment plan so you can see payment terms and fees, dates and when the consolidation loan will be repaid in full
  • help you manage your credit, debt, and other financial obligations into the future.

How to choose a good debt consolidation company

When researching and choosing a debt consolidation company, look for the following:

The following red flags indicate your debt consolidation company could be less than reputable:

  • Being asked to sign bank documents
  • Being given a business loan instead of a consumer loan
  • Not having an in-depth discussion about your debt and financial situation
  • Being told not to worry about reading the paperwork
  • Claiming to be able to help you no matter how bad your situation is

When researching debt consolidation companies, remember to asses their processes, terms and fees as well as the reviews before making a decision.

What debt consolidation options can Debt Negotiators offer me?

If you’re struggling to meet your repayments and have charges for missed payments piling up, a low-interest debt consolidation loan can help stop your finances from spiralling out of control. No matter where you live in Australia, Debt Negotiators are here to help by offering financial guidance and support to help you find the right debt solution for your situation. We can help you find solutions for:

Free Impartial Financial Assessment

Our first step in helping resolve your bad debt situation will be to complete a no obligation, free financial assessment. The assessment will help us to identify your financial situation and budget. Once the financial assessment has been completed, our friendly consultants will be able to offer you free, impartial financial guidance to help you manage your money, identify your eligibility for different debt solutions including finding the best debt consolidation loans for you, and help you get back on your feet and out of the red.

As one of Australia’s most reliable debt consolidation brokers, Debt Negotiators has access to a wide range of banks and financial institutions and can, therefore, negotiate large low-interest secured and unsecured consolidation loans or mortgage refinancing based on your budget. We are experts in debt solutions who understand the law and debt negotiation process.

Debt Negotiators offers you:

  • Independent professional guidance

  • Support throughout Australia

  • Individual solutions based on your financial situation

Talk to Us About Debt Consolidation

Our team is available to speak to on weekdays, no matter where you live in Australia. We’re here to help you identify the best solutions for your current financial situation so you can improve your debt status and avoid bankruptcy, even if you have bad credit.

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