Debt consolidation is something you hear quite often in Australia these days. Many Aussies are struggling with juggling multiple debts of all kinds, so debt consolidation is a very topical subject for a lot of people.
This article is going to be taking a look at debt consolidation in general, the hidden benefits of a Debt Consolidation Loan, as well as the process of applying for one.
What Is Debt Consolidation?
Debt consolidation is simply about combining numerous existing debts into one manageable debt. Debts that can be consolidated include credit cards, personal loans, business loans and other debts.
It’s a process of simplification, making your financial situation far more manageable and less stressful.
What Are the Advantages of Debt Consolidation?
Debt consolidation only works if you have at least two or more outstanding debts. Let’s quickly look at the benefits of debt consolidation.
As mentioned, debt consolidation is about simplifying your finances. Rather than having two or more debts to make repayments on every month, with debt consolidation, you’ll only have to think about making a repayment on the one debt. This means there’s less chance that you will forget to make a payment or be late in making a payment.
Another more hidden advantage of debt consolidation is the possibility of saving cash on interest or admin fees. As a simple example, you might have a number of credit cards that attract high rates of interest. If you can roll these over into a Debt Consolidation Loan with a lower interest rate, you’ll start saving money immediately.
A third benefit that’s likely to be the direct result of debt consolidation is that of not having to make such high repayments every single month. Using the credit card example, you might currently be repaying $1000 per month in minimum monthly payments, whereas with debt consolidation, you may reduce that repayment total considerably, putting more money in your pocket and taking the stress out of your financial situation whilst still repaying your debt.
What is a Debt Consolidation Loan?
A Debt Consolidation Loan is a loan specifically designed to consolidate two or more current debts by rolling them into a new, single loan. The lender may offer loans specifically tailored to debt consolidation, or you might opt for a Personal Loan where you state debt consolidation as the primary reason for taking out the loan.
The Process Of a Debt Consolidation Loan
Once you’ve found a lender for a Debt Consolidation Loan, you’ll want to make sure that you meet their lending criteria. Part of the criteria in this instance will be having two or more eligible outstanding debts that can be consolidated into one loan. You’ll also need to be able to substantiate your loan application with supporting documents that prove your identity and that you have the financial means to repay the loan. If your main source of income is reliant on a Centrelink payment, chances are you won’t get approved for a Debt Consolidation Loan.
If everything is in order and you meet the criteria to apply for a Debt Consolidation Loan, you’ll generally be able to fill out an application form online and submit it along with digital copies of your supporting documentation. This online process helps to speed things up, as well as being convenient. It means you can apply from home at any time that suits you.
Before applying, work out how much you need to borrow to consolidate your debts and use the online calculators to work out the repayment terms and how much you’ll likely have to repay each week or month.
Depending on the lender, they may pay out your nominated debts on your behalf once your loan has been approved or, the money will go into your nominated bank account, after which you can pay out those outstanding debts yourself. Once you’ve paid out those debts, credit cards in particular, it’s wise to completely close those accounts so you don’t increase your debt again.
Talk To Cashify About Debt Consolidation
Cashify is a private lender that specialises in tailoring loans for debt consolidation. To fully understand how we can help you, browse our website and reach out to chat about your current debt situation.
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.