The 5 benefits of consolidating your debt
Having multiple debts at one time isn't uncommon, but it can be stressful. Between the multiple due dates and the different interest rates, things can get messy.
Debt consolidation can be a good solution to this. It's the process of consolidating all of your debts into one and making repayments towards a single debt.
1. No more juggling debt schedules
If you have debts, you know how tough it can be to remember when each one is due or what the minimum repayment is. A key benefit to debt consolidation is that you're making one repayment towards one debt with one schedule to keep track of.
Generally, this is done by taking out a personal loan and using it to pay off all your outstanding debts. And depending on the personal loan you opt for, you may be able to align your repayment dates to your payday so you're always prepared for the payment.
2. Save money on interest and fees
Depending on what kind of debts you have, you may be paying some pretty high interest rates, which just makes it tougher to see the back of them. In fact, credit cards can have interest rates of up to 20% per annum (or more in some cases).
However, personal loans tend to have much lower interest rates, with some starting as low as 6% p.a. If you choose to consolidate your debts, you may have the opportunity to lower your overall interest rate, which means you could be saving thousands in the long run.
It isn't just interest rates either. Credit cards and loan accounts can come with their own fees and charges, and if you have multiple debts, you're likely to be paying multiple fees. So, by consolidating your debt, you'll only be paying one set of fees and charges.
3. Have an end-date to work towards
Another great benefit to debt consolidation is that an end-date is generally built into your personal loan. This means you can get a solid picture of how much you owe, and when you need to pay it off.
From this, you can start to formulate a strong household budget around your repayment dates.
When setting the end-date for your loan term, just keep in mind that shorter loan terms will mean higher repayments, but less interest overall. And vice versa for longer loan terms.
4. Increase your credit score
If you're struggling to keep up with multiple debts, you may be harming your credit score. Late repayments and missed repayments can leave a mark on your credit score which can stay there for years.
Your credit score can impact your ability to access finance from some lenders, and the interest rate at which you're offered finance. So, you'll want to keep it relatively clean.
By consolidating your debts, you may be more likely to make your repayments on time. Over time, your consistent, good financial habits can improve your credit score.
5. Get your life back!
Debt can trigger or worsen things like anxiety, stress and depression. And when you have multiple debts, it can be tough to relax.
One of the best things about debt consolidation is the financial freedom that can come with it. No more stressing about multiple repayment dates, high interest rates or those pesky account fees.
Debt consolidation can also leave you feeling more in control of your finances, because the personal loan you choose is often on your terms.
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