Debt consolidation loans can be beneficial if you are juggling multiple debts and want to pay them off quicker, saving you money in the process.
What is debt consolidation?
Debt consolidation is a process where you take multiple debts – like credit cards, store cards, and personal loans – and combine them into a single personal loan.
This allows you to better manage your debts and gives you just one repayment to focus on, while saving you on debt repayments.
The benefits of debt consolidation
There are several benefits when you consolidate debt. You can:
- Save on interest repayments
- Pay off the loan faster
- Make one simple payment
Save on interest repayments
By moving all your debts into a debt consolidation personal loan you could reduce the interest rate you are paying on the money you borrow, especially if some or all of the debt comes from credit cards or store cards which traditionally have higher interest rates.
You may also save in fees by having just one loan.
Pay off the loan faster
With just one loan to worry about you may be able to pay it off faster than you could with multiple debts.
Plus, unlike a credit card, a personal loan is structured so you repay the loan in an agreed period of time. By their nature, credit cards are an ongoing credit facility and, even if you make the required minimum payment each month, there is no certainty that your credit card will be repaid in a set period of time as there will always be the temptation to use the money you’ve paid off your card for another purchase.
Make one simple payment
It is much easier to focus on one personal loan than multiple loans with multiple institutions all due on different dates.
This could have the benefit of saving you money on late fees as well – money you could be using to paying off your loan faster.
Different ways to consolidate your debt
There are a few ways you can consolidate your debt.
The first is to apply for a debt consolidation personal loan.
The other is to refinance your home loan and roll in any other debt you may have.
Finally, if you only have credit card or store card debt you may want to look at a balance transfer instead
Are there any downsides?
One of the mistakes people can make after consolidating debts is building up the old debts again.
To gain the most benefit with a debt consolidation loan you should aim to pay off the loan f as quickly as possible. That way you’ll ensure you don’t add to your debts by falling into old habits.
Below is an example of how you could save thousands by consolidating your debts.
The first thing to do is to see if having a debt consolidation loan will benefit you.
You can get an idea of this yourself. Simply total up all the debts you want to consolidate and use our personal loan repayments calculator to see what your repayments would be for this amount.
Then compare this to the total of repayments you are making for all the debts you want to consolidate.
If this looks positive and you want to investigate this further, getting your debts under control, it may be time to contact us to talk over your personal situation and the options available.
Have you ever considered a consolidation loan?