A debt consolidation loan combines your unsecured debts into a single monthly repayment. Many Aussies who struggle with massive debt are overwhelmed by this aspect. So, if you don’t want to wreck your credit with bankruptcy, but you wish to ease the debt burden, debt consolidation could be a possible solution.
Debt Consolidation Loans – The Benefits
Lower interest rate
In the case of debt consolidation loans, you could negotiate for getting a lower interest rate. It is implied that this reduces the total sum of the debt.
Lower monthly repayments
If you prefer lower monthly repayments since these are better for your current financial situation, you could change that by extending the lifetime of the loan. A lower monthly repayment makes it easier to budget.
Managing your debt more effectively
After choosing a consolidation loan, you’ll have only one debt payment to make, as opposed to various So, in other words, you won’t have to focus on a multitude of billing statements, due dates, payment amounts and other confusing details. This certainly reduces the stress linked to being in debt.
Although these benefits related to debt consolidation loans are enough reason to go for it, you should also take into account refinancing costs as early payout fees. So, make sure you establish whether this option would actually save you money or just give you the impression you’re doing it.
How Could Debt Consolidation Loans Work for Me?
Many Australians use credit for making a multitude of expenses, ranging from cars to other pricey purchases. Still, with every loan you get, you sink deeper into debt. And reducing your debt is much more challenging than getting in debt, right? So, if you end up borrowing much more than you can afford to pay, it’s time to press the stop button and re-evaluate your options.
So, when should you think about debt consolidation loans?
If you find it difficult to keep up with monthly payments – Since debt consolidation loans reduce the number of repayments you need to make, this will simplify your financial situation. So, if your credit cards are due to reach their credit limits anytime soon, you could consider this option.
If you have equity in your home – In this case, your home loan interest rate would be significantly lower than that of a credit card or personal credit. This makes debt consolidation a viable alternative.
If you have a lot of debt and bad credit rating – Choosing a debt consolidation loan could give you control over your finances. In fact, some lenders provide almost exclusively bad credit debt consolidation loans.
If you’re looking forward to minimising your debt and saving money in interest charges, debt consolidation could be the right path for you. Another way in which you could determine that is by using a debt consolidation calculator. These are easy to use, and they could give you an insight into how such a choice will alter your financial situation!