Getting hit by a global pandemic while you are already in the process of paying off debts can leave you in a bad position. While no-one could see COVID-19 coming, it has affected businesses and workers around the world. Some have been forced to social distance and work from home. Others have lost their jobs and many businesses have shut down. Since entering these restrictions, many people have found themselves out of work. This has meant facing increasing debt with no clear way out. This may leave you looking at the option of debt consolidation during COVID-19.
What is Debt Consolidation?
If you are paying off more than one debt, which could be highly likely with the COVID-19 pandemic, then debt consolidation could be a great option for you. It is the process of bringing all your existing debts together into one new debt. It can help make things clearer for you as all repayments are brought into one manageable package. This means a much easier and simpler way to pay off your debt. You can even save money as a consolidation loan sets one fixed interest rate across all of your debts. This rate is usually much lower than you would have already been paying. The process can be different, depending on how you choose to go about it. Often it involves taking out a personal loan to pay off your debts, then paying back this new loan over a set period.
How does Debt Consolidation work?
If you have taken out loans with different lenders over time, these loans will all have different repayment terms you need to meet. They may come at different times of the month. They will also likely have different interest rate terms as well.
Having all these competing payments throughout the month at different prices can make it very hard for you to stay on top of everything and manage your money accordingly. If you have less money coming in now as a result of COVID-19, this will also complicate the issue. By taking out a personal loan to cover off these debts, you will now just have the one debt to pay off, at the same time each month, with the one interest rate. As you can see, this makes things much easier to manage. Personal loans often have lower interest rates as well. So this can mean the total amount you are paying back is lower as well.
Is Consolidating Debt right for me?
So is debt consolidation the right move for you? There are many pros that come with debt consolidation during COVID-19. But you need to make sure you do the proper research. Here are some things to consider:
- What is the interest rate on the new loan? Will you actually be saving money if you take it out? Or will the interest cost you more?
- Make sure it’s not a scam. There will be many businesses looking to take advantage during the pandemic, so do your research. If the offer seems too good to be true, then it probably is. Some warning signs to look out for are: if they refuse to discuss repayments, rush through the signing process, and aren’t licensed.
- Get a better loan rate. You might consider offering up your home or other assets for secured debt. Make sure you are in a position to pay off this new debt and look into all your other options first before going down this route.
Debt Consolidation during COVID-19
Of course, we are still in the midst of the COVID-19 pandemic. This may leave you wondering exactly how debt consolidation during COVID-19 might work. While it can help to get all your loans in the one place, you may not be in a position to pay back this new loan.
There are a couple of options available to you in this scenario, which we will take a look at.
Firstly, have a look at what Government payments are currently available to you. Have you lost your job or have been stood down for the time being? The Australian Government has introduced the Job Seeker and Job Keeper packages to help Australians out during this time. Depending on your situation, you could be entitled to an ongoing payment during the pandemic to keep you afloat. Some of this money can be put into paying off your outstanding loans.
Secondly, it is worth talking to your new lender and discussing your situation. Many different lenders have measures in place to help people who are struggling right now with COVID-19. You will not be alone in this, and the lender may have suggestions to make the repayments easier for you. Remember, it never hurts to ask.
If you are looking at debt consolidation during COVID-19, just remember you aren’t alone. It can useful to get some professional advice before going ahead. Be sure to speak to the experts at Debt Consolidation today. While your debts may all seem a little overwhelming right now, with the right advice you will be on track to paying off all your loans in no time. With the help of debt consolidation, you can be in a much stronger financial position once we come out the other side of the Covid-19 pandemic.