Having to pay off multiple debts at once can often become overwhelming and easily spiral out of control. Perhaps you have a credit card payment due as well as your car loan payment and by the time you pay the credit card, there is no money left over to cover the car loan as well.
What does it mean to consolidate a loan?
Consolidate means to combine things into a single more effective whole. When it comes to a debt consolidation loan, that means we are bringing all of a persons debts into one single more effective loan.
This usually results in a much lower interest rate than all of the individual loans and also makes it very easy to pay off as there is only one single repayment.
Why would I consolidate my loans?
There are a few very good reasons why you would do this. Lets take a look at them.
A debt consolidation loan can reduce the overall interest you are paying by bringing high interest debt into a low interest loan. It can also save you money by having less fees to pay. Often payday loans and credit cards charge you additional ‘payment’ fees or card fees.
Makes things easy:
Meet Sam. He always gets paid his wages monthly on the 20th of each month. His credit card payment is due on the 16th of each month and the hire purchase loan is due on the 23rd of each month.
He finds it easy to pay the hire purchase loan off, as it always comes just after he gets his monthly pay. But by the time the 16th rolls round, he often struggles to get the money together to pay the credit card and is worried he will start missing payments.
If Sam got a debt consolidation loan for both of these loans, he would now only have one single repayment that he can line up with his pay on the 20th of each month.
Now as soon as he is paid, he can pay his loan payment as well, which means he can live stress free for the rest of the month.
He also has flexibility with the loan term and could decide to spread it out over a longer term than previously which would allow smaller weekly repayments.
Helps your Credit Rating:
By having only one monthly repayment, it means you are less likely to miss a repayment which keeps your credit rating in good health. Also having only a single loan repayment in your bank statement history, looks much better to potential lenders in the future.
Becoming Debt Free Faster:
Because you would only have a single repayment, it makes it much easier to plan ahead and determine when you can become debt free. Use our loan calculator to see an estimate on what repayments might be.
Interested in applying for a Debt Consolidation loan?
Here at Loanplace, debt consolidation loans are our speciality. If you would like to know more, get in contact with us and one of our friendly team members can answer any questions you might have.