Getting out of a debt might seem impossible. If you have a large debt with multiple creditors then debt consolidation may be an appropriate solution.

What exactly is debt consolidation?

In very simple words, it is the process of taking multiple debts and combining them into one, lower interest loan. You have one interest rate, one repayment and one creditor and your repayments should be lower too.

How does debt consolidation help?

The main benefits of debt consolidation are:

• You deal with one creditor and one repayment. So it is useful for people that are bad with money. With multiple bills to pay it can be easy to forget one and incur late payment fees or penalties. Which in turn make your debt less manageable going forward.
• It is a lower interest form of debt. i.e. both your repayments and total interest liability should fall. You may also be able to adjust the payment terms to better suit your situation.
• It can assist you to not accumulate more debt as existing credit facilities are replaced with a single loan. A consolidation loan does not allow you to continue obtaining credit and hence prevents you from accumulating additional debt

Should I consolidate my debts?

Debt consolidation is not for everyone. If you only have one creditor or you are between jobs for example, it may not be appropriate to try to refinance your loans.
The two most relevant questions you need to ask are:

• Will your total interest liability be lower after consolidation? You need to calculate the total liability of your consolidation loan and compare this against the existing debts.
• Do your repayments decrease? Whilst it is advantageous to decrease your total liability, it may not be of help to you if your existing repayments are at an unaffordable level and do not decrease to a more manageable level.

If you would like to find out more about how debt consolidation could assist you to take back control of your debts. Then call us on 1300 308 497 for an obligation free consultation or fill out the short contact form.