If you are like one of many Australians with numerous debts, you’ve probably considered debt consolidation. There are quite a few benefits of debt consolidation when you’re facing mounting debts from multiple creditors. Here are the top reasons for consolidating your debt:
You will only have one repayment
When you’re juggling many different repayments – sometimes on a weekly, fortnightly and monthly basis – it’s easy to lose track of how much is left owing, how much the interest is on each and every balance. Debt consolidation is the process of taking out a loan to cover your debt, and then you repay that one loan. Your single repayment will be bigger, sure, but only having one payment to make is part of the appeal and definitely one benefit of debt consolidation. It also makes it easier for you to budget the rest of your expenses, knowing the exact amount that is needed for your debt which will be the same each month.
Debt consolidation loans have lower long-term interest
Credit cards and car loans are the kind of debt that accrues interest at a ridiculously high rate. With a debt consolidation loan, it is considerably lower, meaning you’ll save more money on your repayment each month as well as over the course of the entire loan.
Improve your poor credit rating
If you’ve been consistently late in making repayments on your debt accounts, your credit score has likely suffered. Unfortunately, a low credit rating makes you ineligible for financing a big purchase – such as a home loan. However! If you have all your debts in the one loan and you’re always on time in paying, your credit will start to rebuild. Having a decent credit rating also means that your bank or provider will lower your interest, potentially saving you quite a bit over the term of your mortgage. Improving your credit and making sure you’ll be approved for a home loan are two more benefits of debt consolidation.
You will stress less
Do you receive multiple calls and letters per week from debt collectors? With one single loan, that will lift a significant weight off your shoulders. There will be no reason for creditors to be hassling you all the time, as your repayments to them will be taken care of. That means you can relax; the sinking feeling you get when your phone rings will be gone.
Now that you’ve read about the ways debt consolidation can help you, you should be in a better position to judge whether it’s the best way forward for you in terms of getting past your debt and repairing your credit rating, as well as easing the emotional burden that accompanies a mountain of debt.