Debt Consolidation Loans
What is debt consolidation?
Debt consolidation simply means combining all of your debts into one single loan.
Why consolidate debt?
If you have a significant amount of debt across various lenders – say for example, car finance, credit card debt, rent-to-buy schemes or retail cards, then it can be a wise strategy to consolidate all these.
What are the benefits of debt consolidation?
Credit cards, car finance, rent-to-buy schemes and the like are considered ‘expensive debt’. They usually attract high interest, and often hefty penalties apply if you don’t make a payment on time. If you’re struggling to repay the debt, and miss a couple of repayments then it can quickly add up to more and more money.
- Save money
On the other hand, personal loans are usually much cheaper. If you have a mortgage, then consolidating all your other debt into your mortgage can be a good idea too, particularly while rates are low, so you’ll save on interest.
- One simple payment
Consolidating several debts into one also means that you’ll only have one monthly payment to keep track of. This can make it easier to budget and it can mean that you’re able to avoid other penalties like late payment fees.
How do I consolidate my debts?
To decide whether or not debt consolidation is the right option for you, you need to consider the pros and cons carefully. Take time to consider your options carefully, and get professional advice about your particular situation.
Before anything else, make sure that you have done a detailed analysis of:
- How much money you owe on each debt.
- The total of all debt owing.
- How much interest you are paying for each debt.
- How long is the term of finance?
- Are you currently incurring penalties or late fees for not paying on time?
- Have you checked the fine print? What’s the cost of breaking the contract earlier than the full contract period?
Take control of your debts
Debt consolidation is one way you can take control of your finances and improve your credit rating. A mortgage broker can help you decide on a strategy, and then, if need be, find you a lender willing to provide a debt consolidation loan. As a follow up, it’s important too, that you get the right guidance so you can avoid the debt-trap in the future.
Avoid a bad credit rating
Now that Australia has introduced Comprehensive Credit Reporting, it’s important that everyone has control over their debt. Getting a bad credit rating can adversely affect your ability to borrow money down the track.
If you’d like more advice about your particular situation, contact us. At Simplify Finance we have a Sydney-based team who can meet with you anytime.