Debt Consolidation

As the name suggests a debt consolidation loan is when you obtain finance to roll all of your unsecured debts into one loan. These debts may include your personal loans, credit cards, phone bills and other utility bills.

If you are in debt there are alternatives to borrowing more money; these include debt agreements.

Benefits
The benefits of a debt consolidation loan are that you only have to make one repayment instead of countless ones. This helps you to remember when to make your payments.

A debt consolidation loan can also lead to lower monthly repayments or a reduction in monthly repayments by extending the payment period.

Facts
There are different types of debt consolidation loans however most are typically unsecured loans which means that you do not have to borrow against your property.

Debt consolidation loans also include fixed rate debt consolidation loans and variable rate debt consolidation loans. A fixed rate loan means that you have a set repayment each week, fortnight or month and your interest rate stays the same throughout the life of the loan.

A variable rate loan means that the interest rate may fluctuate throughout the life of the loan and you may also be able to make extra repayments at no extra charge.

Most debt consolidation loans incur limited or no ongoing fees, however you may have to pay an establishment fee. Debt consolidation loans normally include weekly, fortnightly and monthly repayments.

Example
Say you have a personal loan of $6,000, a credit card owing $4,500 and some outstanding utility bills that you haven’t paid in a while at around $800, with a total of $11,300. When you calculate the minimum repayments of all these debts you may end up with around $420/month.

By consolidating these debts and extending the period of the loan you could possibly end up paying as little as $150 per month.

Find out how we can help you with debt consolidation.