A debt consolidation loan is often cited as a worthwhile financial solution for individuals that are dealing with a lot of separate debts.
What are the benefits that may be enjoyed by using a debt consolidation loan as a financial solution?
One of the biggest challenges with managing multiple debts is dealing with the number of payments that leave your bank account each month. Even the most organised individual can struggle with this element.
As well as the financial element you’ll also be spending time making sure you’re going to have enough money to make payments at various times throughout the month. If the payment amount varies, you may also struggle with keeping on top of what exactly is leaving your bank account each month.
If you take out a debt consolidation loan, you will repay those debts and simply pay one lender, one regular repayment. What’s more, taking out a debt consolidation loan will often mean you have longer to pay. Although your repayment period may be longer you’ll may still save money, as interest will usually be lower and you won’t be accruing any more interest on your existing debts.
When you take out a debt consolidation loan with NOW FINANCE, we’ll pay your creditors so you don’t need to worry about making a payment to your existing creditors. You’ll then just need to make your regular weekly or fortnightly payments to us.
“One of the biggest challenges with managing multiple debts is dealing with the number of payments that leave your bank account each month. Even the most organised individual can struggle with this element.”
As alluded to above, paying off numerous debts can be stressful, particularly if, in addition to dealing with numerous creditors, you’re in such a financial position that you’re taking calls or having to respond to letters on a regular basis.
In some respects, a debt consolidation loan can help to change your life, as immediately the need to deal with a large number of creditors will cease, and you won’t spend your days fearful of the telephone ringing or another letter being pushed through the door.
If you feel you may be getting behind with your debts but not to the extent that you’ve started to miss payments and damage your credit score, then a debt consolidation loan could work for you.
Individuals often find with large credit card debts that their monthly payment achieves little more than servicing the interest that has accrued, particularly if their minimum payment is large yet it is all they can afford to pay. Such a scenario is even more challenging in cases where there are numerous debts to be paid.
With a debt consolidation loan, the overall interest you will pay will often be reduced against what you’d pay on credit cards. While you should check the interest rate of a debt consolidation loan before applying for one, it may be a solution that can lead to money savings.
This is definitely true if you face a scenario similar to the one above, where you’re financially ‘treading water’ and doing no more than paying off the interest each month.
“With a debt consolidation loan, the overall interest you will pay will often be reduced against what you’d pay on credit cards. While you should check the interest rate of a debt consolidation loan before applying for one, it may be a solution that can lead to money savings.”
The easiest way to look at this is to imagine you continuing with your current financial situation against taking out a debt consolidation loan.
By continuing as you are, if you have numerous debts, then your credit score may get worse, particularly if your outstanding debts remain the same and you’re not making significant progress into clearing them.
In contrast, if you were to take out a debt consolidation loan, those debts would immediately be marked as having been paid, and the only debt on your credit report would be the consolidation loan. The outstanding balance would be consistently reducing due to you making your single, regular payment, and as long as you keep up your repayments – and make additional payments if you wish to – this will help to maintain and potentially improve your credit score.
If you decide to take out a debt consolidation loan because you’re struggling with your repayments, you should avoid taking out further credit while paying off this loan.
Our debt consolidation loans of $5,000 to $40,000 are available subject to eligibility, with repayment period from 18 months to 84 months. Contact us now to discover more, or use our personal loan calculator to get an idea of what your weekly or fortnightly repayment is likely to be so you can compare this to your current payments.
Disclaimer: This article contains general comments and recommendations only. This article has been prepared without taking account of your objectives, financial situation or needs. Before taking any action you should consider the appropriateness of the comments made in the article, having regard to your objectives, financial situation and needs. If this article relates to the acquisition, or possible acquisition, of a particular credit product you should obtain and consider the relevant disclosure documents before applying for the product.
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