Debt Consolidation loans explained
If you have multiple accounts and are struggling to remember the due dates for each account, you may wish to apply for a debt consolidation loan. A Debt Consolidation loan will enable you to combine all of your payments into one easy monthly payment.
The ease of only having a single payment each month to remember, will hopefully avoid the risk of missing any payments. Missing payments on your unsecured debts can cause you to incur additional costs in late payment charges and higher interest charges.
The main benefit of consolidating your debts into a single loan is that you will only have to manage one single payment every month instead of multiple payments. If you shop around and you have a good credit rating, you may qualify for a balance transfer. Some credit card companies offer promotional deals where you can transfer your existing credit card balances into a new credit card account and enjoy an interest free period (or a reduced rate of interest).
Before you apply for a debt consolidation loan, you need to prepare a household budget to make sure that you can afford such a loan. If you are struggling to meet the minimum payments on your existing credit cards, it is very unlikely that you could afford a debt consolidation loan and your application will most likely be refused.
What do we do?
Here at Debt Free Australia, we do not offer debt consolidation loans, but we do help people who have been refused a loan. Most people are refused debt consolidation loans for 2 simple reasons:
- “insufficient cash flow” to repay the loan (i.e. insufficient capacity to repay); or
- “poor credit record”.
Debt Consolidation alternatives
If you are struggling to make the “minimum repayments on your debts each month” then it is most likely that you are insolvent. If you are insolvent, you should consider a formal arrangement with your creditors which will make your on-going repayments more affordable:
To understand the differences between these solutions, we have prepared a comparison table.
If you need advice on the alternatives to debt consolidation, please give our highly trained consultants a call on 1800 676 598.