Taking out credit cards and loans can be very beneficial. They can help you pay off unexpected expenses, purchase big-ticket items, or take advantage of opportunities you might not have been able to otherwise. However, occasionally we can find ourselves with too many different loans.
Each one comes with a different repayment schedule, different interest rates and different fees. It can be confusing, to say the least. This is where debt consolidation comes in. It allows you to get on top of these debts so you can manage them better. This debt consolidation guide will share everything you need to know when it comes to consolidating your debt, as well as tips on how to go about it.
A Debt Consolidation Guide: What Is Debt Consolidation?
In this debt consolidation guide, let’s start by looking at exactly what debt consolidation is. Loans and credit cards can be helpful, but when they start mounting it can cause a degree of anxiety. Debt consolidation can help to combat this. It simply refers to the act of taking out a new loan to pay off all your other loans and debts. You have the opportunity to find a lower interest rate, which can save you money in the process.
By bringing all your debts together, you simplify the process and make it easier to manage. You will find yourself with just one monthly repayment to make and stay on top of. Debt consolidation does not get rid of the other debts. When you find a lender, they will pay off your existing debts for you and roll them into the one debt. The debt is simply transferred to this new lender.
There are two different types of loans to explore in this debt consolidation guide:
Unsecured loan: this is when no collateral is offered up against the loan. In this instance, the lender is taking on all the risk. As a result, the interest rate is likely to be much higher.
Secured loan: this is where you offer up collateral against your loan, such as a house or car. This means you take on the risk of the loan. If you default on the loan, the lender is entitled to that piece of collateral. These types of loans generally come with a lower interest rate.
A Debt Consolidation Guide: Benefits
While we have already discussed exactly what debt consolidation is in this debt consolidation guide, now is our chance to take a look at the benefits it has to offer. Debt consolidation is a chance for you to take back control of your finances and get back on track with your spending habits. Here are just some of the benefits it offers:
- Easy repayments: by combining your debts into one, you only have one repayment to make each month. This simplifies the process and makes it much easier for you to stay on top of it.
- Save money: rolling all your money into one loan also has the added benefit of being able to reduce your interest rates. You have the option to seek out a better rate to save you. At the same time, with just one loan to pay off, you will be able to stay on top of the repayments and avoid any late fees.
- Avoid further debt: mounting debt can be a struggle to stay on top of, and you can find yourself missing payments and paying off more interest in the long run. Debt consolidation simplifies the process to get you back on track and in control of your finances.
- Boost your credit score: paying off your debts is a great way to boost your credit score. You need to make sure you meet the repayments and don’t default on the loan.
Before taking out a debt consolidation loan, it is important to do the maths and make sure you are actually getting a better deal out of it. Look at the interest and the fees and compare it to your current situation. You also need to make sure there are no other hidden costs, such as penalties for paying off your original loans early.
Another key part of this debt consolidation guide is to take a look at the process of applying for a debt consolidation loan.
Taking Out A Debt Consolidation Loan
If you are wanting to consolidate your debts into one, then speak to the experts at Debt Consolidation Australia. The process is easy. The first step is to work out if you are eligible by taking 30 seconds to fill out our online form. A finance specialist will give you a call to discuss your specific situation. This will help us to determine the right loan for your needs. From there, Debt Consolidation Australia will help you to get on top of all your debts and back into financial control.