Debt Consolidation Loans – The All-In-One Guide

By February 26, 2021 October 18th, 2022 Personal Loan

As Australians, we have access to many different types of finance for all sorts of purposes. Whether it be a loan to buy your dream home or a credit card for those small purchases, everything is on offer from Aussie lenders. If you need to borrow money for practically any purpose, chances are you’ll find a financing product that fits your needs.

One type of finance that has been trending in recent years is the debt consolidation loan. In this debt consolidation guide, you’ll discover exactly what debt consolidation is, why you would want to consider it and the advantages of streamlining your finances.

While borrowing money can become a liability, there are ways to ease the burden of repaying loans, and a Debt Consolidation Loan is one way of doing just that.

What Exactly Is Debt Consolidation?

The word “consolidate” means to either make something physically stronger and more robust or, to combine a number of things into one. It’s this second part of the definition of consolidating that is relevant to debt consolidation.

f you only have one loan or debt to repay, then debt consolidation won’t be a consideration but, if you have two or more debts, then consolidating those debts into one simple debt might be something you’ll want to consider.

To put it simply, debt consolidation means to consolidate 2 or more debts into one debt.

How Debt Consolidation Works

If you have several debts and wish to consolidate, search for a lender who offers Debt Consolidation Loans, or Personal Loans with reasonable interest rates and terms. You can then apply for enough finance to completely pay out those current debts you wish to consolidate.

Your previous debts will then be cleared, leaving you with just the one easy-to-manage Debt Consolidation Loan to repay.

You can either receive the money for the new loan into your account and payout your other debtors yourself, or in some instances you can arrange with your finance company to use the funds to repay those existing debts for you. Which way you do it is up to you. If you decide to pay those debts out yourself with the new loan, just don’t be tempted to spend the money on something else. Stick with the plan.

The Key Advantages Of Consolidating Debt

Let’s now dig into the main reasons why you would want to consider consolidating several or more debts into one.

One of the most common types of debt people choose to consolidate is that of credit cards. Most credit cards attract high-interest rates – higher than your average Personal Loan – have annual fees attached to the account, and often have rather high monthly repayments that need to be met month after month and year after year.

Some Personal Loans and Car Loans can also attract high-interest and monthly repayments, depending on the deal you accepted at the time of taking out finance.

There are a number of key advantages to getting a Debt Consolidation Loan. The first is that you can save yourself money on interest. For example, if you have 2 credit cards with interest rates of around 18%, but pay these cards out with a loan where the interest rate is lower, you’ll save a considerable amount of money over time, just by reducing your interest rates.

How much you can save is obviously going to vary, depending on your credit card deals and the terms you end up getting on your Debt Consolidation Loan, but so long as the interest rate on the new loan is lower than that of your credit cards, you will instantly be saving money on this one thing alone.

Lower monthly repayments are also a distinct possibility if you shop around for the best deal on a Debt Consolidation Loan. Let’s look at another simple example. You have 2 credit cards with a combined monthly repayment total amount of $500. You arrange a Debt Consolidation Loan where the monthly repayment amount is $300. That’s an extra $200 in your pocket every month.

Of course, these scenarios will vary depending on your lender and your circumstances, but they give you an idea of the potential advantages.

Yet another benefit of Debt Consolidation Loans is simplifying and streamlining your debt situation. In other words, rather than having to remember to repay several or more debts per month, you now only need to focus on repaying the one debt.

If you suffer from disorganisation or often forget to make repayments, at least this way you’ll only have the one repayment to think about. Better still, arrange to have the repayment direct debited from your account so you’re never late. This also helps your credit score.

On that note, will a Debt Consolidation Loan improve your credit rating?

It can, in the sense that you have technically reduced the number of debts you currently have. So long as you make your repayments on time, if your credit score has suffered over the years, this type of loan can help to rebuild your credit health over the long term.

Before Considering a Debt Consolidation Loan

First things first. Take a look at the debts you want to consolidate and work out the interest rates, ongoing fees attached to those debts and how much your monthly repayments for each debt are.

You’ll want to do this initially so you know exactly where you currently stand with your debts, and whether a Debt Consolidation Loan deal you are considering is really going to benefit you or not.

When taking out a loan to consolidate your debt, you want to be smart about it, so do your homework and research before applying for finance.

How To Get a Debt Consolidation Loan

Every lender in Australia is a little different, so be sure to study their terms and fine print. If you don’t understand something: Ask the lender.

Not every lender will offer loans that are specific to debt consolidation. With some finance companies, the only option might be applying for a Personal Loan. However, many lenders are happy for borrowers to use Personal Loans to consolidate debt. Just be sure to check with the lender first to determine whether this is allowed under their terms.

Now that you’ve worked out what you’re currently paying monthly, your interest rates and fees attached to your current debts, you can start shopping around for a Debt Consolidation Loan that will offer you a better deal than what you are currently faced with.

The easiest way to find and study the deals of various lenders is to search online. There are numerous loan comparison websites that offer loan deals from Australian lenders. These websites make doing comparisons relatively simple. When you have sourced some lenders that might be right for you, go to their websites and study their terms, what fees are attached to their loans and so on. Also, use their loan calculators to get an idea of how much you’ll need to repay per month depending on the length of the loan terms.

It’s in your best interest to take your time with this phase of debt consolidation, as you want to find the best deal possible to reduce the stress of debt in your particular case. After all, the idea of debt consolidation is to save money and make life easier for you. Otherwise, there’s a little point even thinking about it.

Who Offers Debt Consolidation Loans?

Most lenders in Australia will offer some options for debt consolidation. Not all will tailor loans specifically for this purpose, but the majority of lenders will have Personal Loans as a part of their finance product suite.

Whether it be a bank, building society or a private lender, you’re spoilt for choice when it comes to options in this country.

When people think of borrowing money, their thoughts often turn to the banking sector. While banks are a trusted source of finance, they’re not the only game in town. You can often find better deals if you look outside the box.

The private lending sector has been gaining popularity among Australians. If you’re looking for a Debt Consolidation Loan with competitive interest rates and terms, you’ll want to see what the private lenders have to offer.

There can be a number of advantages to dealing with a private lender. One major advantage is the speed of the application and approval process. Once you’ve made a decision to consolidate your debt, a private lender will often process and approve your application, either on the same day or the next business day. This saves you waiting around for weeks at a time to get a decision.

Consolidate Your Debt With Cashify

Cashify Loans is a private lender that has been helping everyday Australians improve their financial situation with debt consolidation. If you currently have 2 or more debts that you would like to consolidate into one, get in touch and have a chat with one of our friendly staff members.

We are happy to help and can answer any queries you may have. Talk to us today and discover how we can serve you.

Disclaimer: Please note this content is of general nature only and does not take into account your personal objectives, financial situations or needs. For advice tailored to your financial situation, it is advised that you seek guidance from an accountant or financial advisor. The information contained in this article is correct at the date of publication.

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