What is debt consolidation?
If you’ve found yourself struggling to manage multiple debts from credit cards, personal loans and store cards, you’ll know how stressful it can be to stay on top of your repayments. Debt consolidation is when multiple debts are rolled into one debt with a single repayment. This can make your debt easier to manage and can potentially save you money on fees and interest.
When is debt consolidation a good idea?
If you’re paying interest and fees on multiple loans, consolidating your loans may help save you money and pay down your debts faster. When looking to consolidate multiple debts into one, it’s important to make sure the new debt consolidation loan gives you a lower interest rate than what you’re currently paying. This way you’ll pay less interest on your debt overall.
Explore our personal loans for debt consolidation.
The advantages of debt consolidation
Having one debt consolidation loan usually outweighs the benefits of having multiple smaller debts. Here are some of the advantages of debt consolidation.
Easier to manage your repayments
One loan's much easier to manage than multiple loans or cards across multiple providers – just one recurring repayment, with a single interest rate.
Having one loan also means setting up a repayment plan is easy. With a fixed repayment schedule you’ll have greater control of your budget.
Use our debt consolidation calculator to see how consolidating your debts could impact your repayments.
A clear timeline
Having just the one loan to pay off will give you a better idea of when you’ll be debt free. If you’ve been stressed and struggling with your debts, this clarity can be a great motivator to help you stay on top of your repayments, save money, and maybe even pay off a little bit extra when you can to get rid of the loan faster.
Get on top of your credit score
Having one, easy-to-manage debt is a good way to improve your credit rating. Managing multiple repayments can increase the likelihood of late or missed payments, which hurt your credit score. With just one debt to manage you’ll be in a better position to rebuild or improve your credit score.
You could save money
There are several ways debt consolidation could save you money. The first is by choosing a debt consolidation loan with a lower interest rate than your current debts, so you’ll pay less interest overall. You may also be able to save money on fees or reduce your repayments to give your budget a little extra breathing room.
Things to consider
Here are a few additional things you should keep in mind when consolidating your debt:
- If you switch to a loan with a longer term, even if the interest rate is lower, you may end up paying more in interest and fees.
- Paying off your debt quickly is important but having a budget you can manage and stick to is as well. Learn more about sticking to a budget.
- Consider scheduling your repayments to be due right after your pay day to help manage your budget and give you peace of mind.
Want to apply for a personal loan?
Learn about our personal loans for debt consolidation and apply today.
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