Consolidate your debts and pay them off faster
DEBT CONSOLIDATION LOANS
Multiple debts can be a big concern. If you have several debts such as credit cards, store cards and other loans, you could benefit from consolidating them into one loan. This means fewer payments, reduced fees and more sleep.
Debt Consolidation involves taking out a new loan to pay off all your existing ones. This leads to greater control of your money, and one repayment to manage. It will also save you on overall interest fees and charges. However there is little point getting these under control if you don’t get your spending under control. Debt Consolidation doesn’t make your debts go away, it just makes them more manageable.
Say you have $18 000 in debts that consist of:
- $3 500 on a credit card (19.95% interest, minimum monthly payment $87.50)
- $2 500 on a store card (22.5% interest, minimum monthly payment $62.50)
- $12 000 on a car loan (8.5% interest, monthly payment $275)
You have three payments to make, with different fees and charges and multiple bills and statements to track. Your total monthly minimum is $425. Remember that paying the minimum on store and credit cards could mean it takes 25+ years to pay it off.
Consolidating these debts into one loan means there is one repayment amount, one interest rate and one set of loan fees. Consult your repayment schedule to find out how long it will take to pay it off. If you rolled these loans into one loan it could reduce your monthly payment to $115 (and take 30 years to pay it off). Whereas if you paid $350 per month you would pay it off in 5 years.
Before you consider debt consolidation, consider:
- How much money do you owe on each debt
- What do they all add up to?
- What interest rate are you paying for each debt?
- What is the minimum monthly payment?
- How long have you got to pay them off?
- What extra fees and charges are you paying because you have multiple debts?
Is there another way to Consolidate my debts?
If you can't increase the limit on your home loan, consider a personal loan at a slightly higher rate. If you took out a personal loan at 15.25% over 7 years your monthly repayment is $350.
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