We all know debt happens, but getting it under control is a whole different ball game. New information from Commonwealth Bank and Melbourne Institute: Applied Economic & Social Research shows that financial wellbeing scores are significantly higher than they were before the COVID-19 pandemic.
If you want to join the crowd and start taking charge of your finances, a consolidation loan could be the way to get a head start on the new fiscal year.
If I am in debt, how will one more loan help me?
Taking out a larger personal loan as a way to consolidate existing debt can be an effective way to redirect your financial focus.
Consider your current debts. Maybe you took out a car loan to buy your current set of wheels and you have a credit card that needs to be paid off regularly. Factor in Buy Now Pay Later installments and you’ll feel like life is a constant cycle of payout after payout!
A debt consolidation loan essentially consolidates these small debts into one sum, allowing you to pay off the amounts owed. Rather than owing varying amounts in different places on different repayment schedules, there are many benefits to consolidating your debts.
By moving this debt to one place, you can gain greater control over your repayment schedule and the interest rate you pay. A unique repayment schedule is useful to avoid late fees, as well as to minimize individual fees on each product.
You can also lock in a single interest rate instead of being at the mercy of multiple rates, thus avoiding, for example, a store’s credit card with a particularly high interest rate. Look for a debt consolidation loan with a lower interest rate to pay less over time – we’ve got a handy comparison tool to help you find the right one for you.
Is there anything to look out for when consolidating my debt?
Nothing is ever as simple as it seems! Although a debt consolidation loan can help you consolidate all your debts in one place, it can also have drawbacks.
If any of your existing debts are fixed at a low interest rate, it’s entirely possible to find yourself stuck paying a higher interest rate than you originally borrowed. Likewise, if you’re about to pay off an existing loan, using a debt consolidation loan to pay it off can give you a much longer (and expensive!) repayment period.
It’s also important not to use a debt consolidation loan for the wrong things – for example, a home loan. The extended life of a mortgage is much longer than the term of most personal loans and will create extended debt and higher interest in the long term.
decided to release a debt consolidation loan? Take a look at our guide to the do’s and don’ts to ensure smooth browsing.
DISCLAIMER: The comparison rate combines the lender’s interest rate, fees and charges into one rate to show the true cost of a personal loan. The comparative rates displayed are calculated on the basis of a loan of $30,000 with a term of 5 years or a loan of $10,000 with a term of 3 years as indicated, on the basis of repayments monthly principal and interest payments, on a secured basis for secured and unsecured loans. basis for unsecured loans. This comparison rate applies only to the example or examples given. Different amounts and durations will result in different comparison rates. Costs such as withdrawal fees or prepayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may affect the cost of the loan.
^ See Mozo Experts Choice Personal Loan Awards information
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