Why Should I Consolidate My Debt?

Are you in debt, snowed under and juggling a number of high interest monthly payments, or simply just want to simplify your finances? Then a loan consolidation may be an option for you.

Debt consolidation replaces multiple loans with a single loan, often with a lower monthly repayment over a longer repayment period. Restructuring unsecured and secured loans into one or two lower interest loans can generate significant savings and provide a simple monthly payment plan.

For example; Matt has two credit cards owing $12,000, a car loan of $12,500 and a personal loan of $8,000. His current monthly repayments total $1,801 per month. By consolidating these debts into his home loan he lowered the interest rate and has one simple repayment amount to $230.00 per month – a significant saving of $1,571 per month.

Will I Qualify?

If you are a home-owner you can utilise the equity in your in your home to consolidate your unsecured and secured debts and reduce the interest to a home loan rate which will potentially save thousands off your repayments. If you do not own a home, then refinancing unsecured debts into a low interest personal loan should reduce the interest and juggling and provide savings overall. There is also the option to balance transfer your credit card balances, which can be beneficial.

No matter what your Debt Refinance strategy is, it is absolutely essential that you budget your expenditure going forward to ensure that you are able to consistently repay all outstanding debt.

What If I Have Bad Credit Or If I Am Behind In Payments?

If you are a home owner and have a bad credit history or you are in arrears with any existing debts there are still options available to you to consider. The idea however is to save money and when considering the options the benefits need to outweigh the costs. Unsecured loans can’t be refinanced under these conditions and possibly credit agreements should be considered in this instance.

How much will I save?

It is important to know how much you could potentially save prior to making a decision to consolidate your debt. Ask your broker or finance coach to provide clear figures on new repayment amount so you can make a logical decision.

What is unsecured and secured debt?

Secured debt is debt that has an asset, like a car or property, which is held as security or collateral. Unsecured debt does not hold any security or collateral. These type of debts are made up of; credit cards, personal loans, store cards, utility accounts (including telephone/electricity), Interest free loans, personal loans, medical bills.