Debt Consolidation Loans
Debt consolidation loans are used to reduce multiple debts from different lenders and rolling these into a single easy to manage loan.
1. Lower interest rate by consolidating all debt into a lower interest rate loan
2. One easy repayment by consolidating all your credit card, personal loan, and other debts into one loan
3. Reduce Stress by paying out creditors that have been requesting payments
4. Easy to manage - by reducing the interest rate and extending the loan term, repayments are likely to be less
Let's say you had the following debts;
1. two credit cards with a balance of $12,000 @ 18% per annum. Minimum repayments are $360 per month
2. personal loan for $10,000 @13% per annum. Minimum repayments are $228 per month
3. car loan for $20,000 @14% per annum. Minimum repayments are $273 per month
Therefore, your total debt is $42,000 and you minimum monthly repayments are $861 per month.
By consolidating all these debts into one loan the total debt will remain the same but the monthly repayments will reduce significantly by finding a lower interest rate and extending the term of the loan.
For example if we were to consolidate all these debts into a personal loan at 10% per annum and a term over 10 years your repayments would reduce to $652 per month. This is over a $200 saving per month and you get to make one easy payment.
Depending on your situation debt consolidation loans can be any of the following;
1. Using equity on your home to consolidate debt at a lower interest rate than unsecured debt
2. Finding a low rate personal loan either secured or unsecured
3. Low rate credit card