Debt consolidation helps you combine all your interest rates and multiple debts into one loan that can be set at a lower rate. In other words, you take a new personal loan that comes with one interest rate and one regular repayment. But should you consolidate your debt to pay off your credit cards?
Let’s say you own four credit cards, each with a different debt between two thousand and ten thousand Australian dollars. The chances are that you will have four different interest rates and four repayments per month.
Now, with debt consolidation, you could bring all those credit card debts together resulting in new debt with a lower interest rate than your other card debts had. Add in the fact that you now have just one payment per month instead of four and you just got closer to controlling your credit cards debt.
Should I Consolidate My Debt?
Firstly, before consolidating your debt, you should search on the Internet for a debt calculator and do some math. Gather all your debt, your interest rate, and other taxes and see how much money you save with or without debt consolidation.
If you have a low-interest rate and a small debt, then consolidating your debt might be redundant as you will save/gain next to nothing. In other words, if you control your debts and taxes like a champ, there is no reason to over-complicate yourself and your taxes with debt consolidation.
Secondly, it is wise to ask an expert for advice. They will discuss the best option for you and advise you on whether you should consolidate your debt to pay off your credit cards or not.
Debt Consolidation Options
You gathered all your debts, your interest rates and other fees that you have to pay separately every month. Now, you will have to choose which type of debt consolidation you would prefer:
- Combine all your debts into one single personal loan – With a fixed term, you will have your debt cleared at the end of every month. You will also have a lower interest rate, and you will eliminate multiple This will result in simplified monthly repayments.
- Transfer all your credit card balances into one card that has a lower interest rate. By doing so, you will have a simple banking method, and you will also eliminate a lot of fees.
- Home loan top-up is another way of consolidating your debt. It is fast and profitable. It also simplifies finances with one monthly repayment and comes with a lower home loan rate.
Based on your financial situation, it’s up to you to decide what type of debt consolidation you need or even if you need one at all. With three options to choose from and different methods to pay, there is a way for everyone to simplify their financial life.
It is recommended that you ask an expert in the field if this is the right step for your financial status. Avoid doing any business with anyone who refuses to talk about repayments, asks you to sign blank papers, and doesn’t present the interest rate and loan costs on the signing document.