If you struggle from month to month to pay off several debts, all at high, fluctuating interest rates, you need relief. You’re not the first. Plenty of Australians share your challenge.
What if you could transfer all of your debts into one low, unchanging payment? You can, with debt consolidation.
When you collect all your current debts to create a new debt, that’s what financial experts call debt consolidation. With debt consolidation, you have a better handle on your repayments because you’ll have only one monthly payment to take care of, and only one balance.
Usually, borrowers consolidate their debts by taking out a new loan, paying off the existing debt with the money lent. They then pay off the new loan within a given time.
Let’s say you have two credit cards, each with a balance of $4,500. You also have a personal loan that you still owe $3,500 on. Chances are you’ll have different interest rates on each. You have three separate payment dates to remember every month.
Sometimes, the credit card companies change the interest rate—usually to raise it, especially if you’ve forgotten a payment or two. You’re probably paying quite a chunk of change every month on interest alone. That’s a challenge. Add to that the stress of having to remember three different payment dates—and you can see why you’re in over your head.
A debt consolidation loan provides a solution to that challenge. Take out one personal loan to pay off those loans. With the new consolidation loan, you’ll have only one payment a month. Your interest rate will never change. Most of the time, the interest rate on the new loan will be way lower than what you’re paying on the credit cards—maybe even on your personal loan.
You need debt consolidation when you can’t remember which bills are due when. When your interest rates on credit cards stop you from paying down the debt, you need debt consolidation. Debt consolidation can also help you create a monthly budget you can depend on. No fluctuating interest rates, no multiple payments.
If you have multiple debts, the question should be, “Why would you not consolidate your debts?” It just makes sense. Here are the key advantages: