Debt consolidation combines several loans into a single loan, assisting you to manage repayments, reduce interest rate costs and control your debt.
Benefits of debt consolidation
Some of the possible benefits of consolidating debt include:
Things to consider before consolidating debt
The biggest single issue with debt consolidation is that your debt is now ‘secured debt’, so if you don’t pay it back, you risk losing your ‘security’ – your house. Other typical consideration points with debt consolidation include:
Getting back on track
Although you may only be able to make the standard required repayment of your consolidated debt at first, as your finances improve you should aim to increase your repayment above the minimum required. This will help you to reduce the interest charges over the life of the loan.
Be mindful that debt consolidation should not be seen as a ‘complete fix’ and it’s important to look at the underlying reason you have excess debt in the first place; debt consolidation is simply a useful strategy to get your finance goals back on track, not an all-out solution to your financial problems.