Anyone who’s ever had to juggle multiple debts will know just how challenging it can be, both financially and for your stress levels.
For many people, consolidating your debts into one loan can be a big help. It won’t magically make the debts go away, but it can make them easier to manage. Here are some of the benefits of debt consolidation.
1. Save money
If you have multiple debts, you’ll also have multiple repayments, interest rates and other costs. For example, if you have debt on two credit cards, you’ll have two bills to pay off and potentially two credit card fees to pay each year. The same goes if you have multiple personal loans with monthly fees. By bringing your debts together in one loan, you’ll no longer have multiple fees to pay.
You should bear in mind, though, that there may be ‘break costs’ associated with paying off your other debts early. In the long term it can still work out better to pay the break fees to avoid the multiple ongoing fees.
Moving your debts to a single loan could also allow you to take advantage of a lower interest rate with a different lender. This could mean lower repayments for your hard-earned money to cover. For example, the interest on a consolidated personal loan would often be lower than the interest rate on a credit card.
2. It can make managing your finances easier
As well as being able to save money, consolidating your debts can help you with your monthly budgeting. Instead of having to juggle multiple repayments and direct debits at different times of the week, fortnight or month, you can move to a single regular repayment.
Plus, you may have the option of moving to a fixed rate loan which would mean a set repayment amount that won’t change for a set term.
You’ll also have one loan statement, one lender to deal with, one online banking login… and a lot less admin to worry about.
3. Get a loan with extra features
Not only could you get a better interest rate and save on fees, you could also access extra features by moving to a new personal loan. These could include:
- No early payout fee, so you can pay out your loan sooner without it costing you more.
- Being able to make extra repayments without penalty, meaning you could pay off your loan sooner.
- Choosing to make your payments weekly, fortnightly or monthly (paying weekly can mean you save on interest over the life of the loan).
4. Move to a different financial institution
If you’re not happy with the service you’re getting from your current financial institution(s), you don’t have to stay with them. Shop around and you may find a lender offering a better rate with more features to help you manage your finances.
Thinking about consolidating your debt? Take a look at our range of personal loans.View personal loans
Important information: Please note that this is only intended as a general guide in relation to issues you may want to consider when consolidating your debt. It is not intended to be an exhaustive list of all relevant issues and you should take into account your own particular circumstances, and obtain independent expert advice where needed, before proceeding.