Debt Consolidation Loans
If you’re here, chances are you’re drowning in debt and can’t keep up with all your different monthly repayments.
In all honesty, we don’t blame you, and we understand how overwhelming that can be, which is why you should consider debt consolidation loans or other types of loans in Australia. And we’re here to guide your hand as you make that choice.
What Are Debt Consolidation Loans?
Consolidation loans aim to combine multiple hardship loans into one loan with regular repayments. Debt consolidation is achieved by extending an already existing bad credit mini loans or taking out a new pay day loan so that you can pay off existing debts in full. This easy loan approval requires that a new interest rate and repayment plan are in place.
As indicated by our tests, this process can simplify your fast cash loans for unemployed so that it’s easier for you to keep up with your repayments. Moreover, it can serve to lower your interest rates, cut down fees, and reduce your monthly instalments by extending the loan term, although the latter would mean a higher total interest.
It’s crucial to note that loan consolidation doesn’t reduce your principal loan amount per se or cure your financial problems. But it makes it easier for you to tackle them by collecting them into one sizable loan.
Is Consolidating Debt Loans a Good Idea?
If you’re hesitant as to what the right move is, consider the following aspects.
- Current Monthly Repayment- Knowing your current monthly repayment can help you decide if debt consolidation is worth it.
- Current Interest Repayment & Fees – By calculating your current interest rate and total fees, you’ll know the total cost of borrowing.
- Exit Fees & Penalties – If your current loan contract dictates that you pay exit fees and penalties, factor them in to know if debt consolidation would cost or save you money.
- Credit History – Your credit history impacts your ability to secure loans and the interest rate at which you’re able to secure them, so you need to consider that.
Tip: If you want to see what your debt consolidation loan cost would look like, you can use a debt consolidation loan calculator.
Should I Choose Debt Consolidation or Refinancing?
This depends on what you’re looking to achieve. Consolidation and refinancing share many affinities, as existing debt is transferred into new debt with more convenient terms for the borrower.
However, the main distinction between both lies in that refinancing usually concerns one loan only, which could be a property loan or another high-value asset. In contrast, a debt consolidation needy loan can refinance multiple loans into one, such as easy financial loans bad credit, credit card debt, and Buy Now Pay Later debts, among others.
What Are My Options for Debt Consolidation Loans, Australia?
There are multiple options, but the most common ones are:
1. Personal Loan
Your first option is to take out personal loans or extend existing ones, and they can be a trustworthy unsecured loan. If you’re going with this option, focus on the interest rate and fees, and make sure they’re manageable.
Tip: Aim to pay off your loan as early as possible so that you can save money on interest.
2. Refinancing Using Mortgage
Mortgage interest rates are typically lower than personal loans’ interest rates, making them popular among homeowners.
Nevertheless, if you usually resign to paying only the minimum mortgage repayment each month, that can cost you a lot more than the loan’s original cost. Also, merging different debts into your home loan can be tricky because you might end up paying more interest over the 3000 loan term.
3. Credit Card Balance Transfer
Drawing from our experience, some credit card providers allow you to transfer existing debts to a credit card with a high initial balance and a low promotional interest rate. Just make sure the promotional rates last a reasonable period and inquire about the rate after that period ends. Furthermore, you may be charged high fees due to the low promotional interest rate.
What Are the Debt Consolidation Loan Types?
Secured vs. Unsecured
A secured debt consolidation loan requires providing an asset (car, house, or others) as collateral so that if you fail to pay off your loan, the lender can repossess the asset. In turn, it has lower interest rates and fees. Unlike secured loans, unsecured debt consolidation loans don’t require security, but they tend to have higher interest rates and fees.
Fixed Interest Rate vs. Variable Rate
On the one hand, fixed interest rates grant you some stability because you can make a clear budget, but they may not come with the option of early repayment. On the other hand, variable rates tend to come with lower interest rates and fees; however, there’s the market’s unpredictability to be wary of.
Can a Debt Consolidation Loan Hurt My Credit?
Through our practical knowledge, debt consolidation can be bad for your credit score if you fail to make your repayments, similar to any other loan. Nonetheless, paying off loans actually improves your credit score and your finances in the long run.
Ultimately, you can count on debt consolidation title loans to combine several loans into one sizable loan. Thus, they’re easier to manage, and that could mean fewer fees and lower interest. Just be sure to calculate the total costs of your current loans and compare them to that of the debt relief loans to decide whether consolidating loans is in your best interest.