Debt consolidation is an act of taking out a new larger loan to pay off smaller multiple loans. This can be at a lower or higher interest rate depending on your credit score. Debt consolidation makes sense when you end up paying less interest than you were paying before and the total amount payable is less.
WHEN SHOULD YOU NOT CONSIDER A DEBT conSOLIDATION LOAN?
- You can’t afford the new loan payments until the loan is repaid.
- You don’t clear all your debts with the loan instead you use the loan for something else.
- You end up paying more in total as result of the monthly repayment being higher or the term of the agreement being longer.
- When you really need help sorting out your debts rather than taking a new loan – our debt counsellors are able to negotiate with your creditors and arrange a manageable repayment plan.
- When the debt consolidation loan does not cater fully to your day to day cash flow needs.
why DEBT CONSOLIDATON WITHOUT TAKING A NEW LOAN is a better option?
When getting a debt consolidation loan doesn’t make sense our debt counsellors need to be negotiating with your creditors and arrange a manageable repayment plan on your behalf. Debt review allows you to benefit from:
- Consolidating all your debts into one, without the need to take out one bigger loan.
- All household expenses are covered. A debt consolidation loan usually does not cater fully to day to day cash flow needs.
- Interest rates can be reduced as low as zero. This is highly unlikely when compared to an unsecured debt consolidation which can attract high interest rates.
To learn more about debt counselling click here.
WHAT TYPES OF DEBT CONSOLIDATION LOANS are AVAILABLE?
There are two types of debt consolidation loans:
- Secured – where the amount you have borrowed is secured against an asset e.g your home. However, if you miss repayments, you could lose your home.
- Unsecured – where the loan is not secured against your home or other assets. An example would be a personal loan.
Find out if you qualify for debt consolidation without taking a new loan.