Debt consolidation is a loan that you would take out to consolidate several smaller loans into one loan. Basically, paying off the balances of all the other loans. The goal of a consolidation loan is to reduce monthly instalments usually by means of lower interest rates and extended payment terms.
13 December 2015
At DebtBusters, we know that it can difficult to manage your finances, especially if you’re already in a sticky situation. The good news is that with debt consolidation; you could make paying your debt in 2016 a little easier for yourself.
January often brings with it financial strain. By now you should have prepared your 2016 family budget. If you have, well done, but remember that implementation of your budget needs to start now…and not in 2016. If you have not, then we suggest you prioritise getting it done now before you rush off on a last minute Christmas shopping spree.
There is a very good reason why you need to start implementing your plan now; you are likely going to receive your end of December pay early. Without proper planning, you could get carried away with Christmas spending, leaving you and your family with little to no cash flow for the end of the month bills and the extra expenses that the start of the New Year brings with it. By planning and putting the right amount of money away now, you can avoid a situation where you can’t afford your monthly living expenses, back to school costs and debt repayments.
If you find after doing your budget for 2016, you are in a tight spot and need to reduce your debt repayments and free up some cash flow, then here is what you could do;
First things first, negotiate with your creditors
Don’t leave calling your credit providers till it’s too late. If you can see that you are going to struggle to make some of your debt repayments in January, speak to your creditors about it today. You’ll be surprised how accommodating they can be in assisting you to not only make a payment that satisfies them, but also keep your credit record intact. It is better to negotiate a reduced payment for a few months that to simply short-pay or not pay at all.
Consolidate your debt
If you find you are still struggling, after you have negotiated lower repayments with your credit providers, then you could apply to consolidate your debt. Debt Consolidation can be a very effective method for debt re-financing. It involves you taking out one bigger loan to settle all your other, smaller loans. It is a solution designed to simplify multiple debt repayments and could save you if the interest rate on the new loan is lower than that of your other smaller loans. The benefits include;
- Only having to pay one credit provider
- A lower monthly repayment (if the interest rates are lower)
- A saving on service fees, administration charges, debit order charges and insurance costs
- It will appear to credit bureaus that you have paid up your smaller accounts and your credit score should improve
How much does Debt Consolidation cost?
There are costs pertaining to debt consolidation, but they are not significant when you consider the money you will save from consolidating your debts in the long run. Similar to securing a loan, your interest charged on the consolidation loan will be determined based on your credit history.
How to apply for Debt Consolidation?
If you are in need of financial assistance and are experiencing any of the above situations, call DebtBusters on 0869 99 0606 to speak to a debt expert who will be able to guide you through the process of applying for debt consolidation.