Debt consolidation is when you consolidate (i.e. combine) all your debts, such as existing loans, credit card balances and borrowings into a single loan. This means you will only need to make one repayment, one interest and one set of loan fees.
What are some benefits of debt consolidation?
- To secure a lower interest rate. If you have credit cards the interest rates are generally higher than the rates for debt consolidation; and
- To reduce the number of payments you have to manage each month. By combining them all together it saves you the hassle of multiple organising payments each month.
- It can help you boost your credit rating. Your credit rating is impacted by various factors. If you are unable to pay your credit cards on time it can negatively affect your payment history which has a large stake in your credit rating.
It is important that before you apply for a debt consolidation loan you compare the interest rates of your current debts and see how they compare. Consolidating debt with a personal loan will only benefit you if the new loan has favourable terms and a lower interest rate than your current debt. Before you enter the new loan it is crucial that you carefully assess if you can afford the loan to avoid putting yourself into further debt.
If you would like more information about debt consolidation or are looking for alternative options then give us a call on 1800 676 598. Our personal debt advisors help you find a debt solution appropriate to suit your needs.