What is debt consolidation?
Debt consolidation is the process of combining a variety of debts into one payment. High interest loans (like personal loans and credit card repayments) are combined with a low interest loan (like your home loan) to obtain a single monthly payment with a lower interest rate.
So why should you consider consolidating your debt?
There are four key advantages to debt consolidation.
Simplify your finances
Managing multiple loans can be tricky. Many people misjudge their repayment schedules and end up paying more in fees and interest, landing them in more debt. A single, easy, monthly payment can avoid these problems entirely.
Lower Interest Rates
Consolidating your loan may mean securing a significantly lower interest rate. That means your monthly repayments could be lower and you will save significantly on the interest over the lifetime of the loan.
Lower Monthly Repayments
The lifetime (term) of consolidated loans is usually higher, meaning that you have more time to pay off the same amount of debt. This means your monthly repayments could be lower, helping you stay on top of your repayments.
Credit Score Protection
Making late payments will harm your credit score. This damage can be a significant impediment and negatively affect your borrowing in the future. A single repayment that you can keep on top of is better for you now and in the long run.