What are Debt Consolidation Loans
A Debt Consolidation Loan is simply a new loan that is taken out to replace multiple debts. Your other debts may include for example multiple credit cards, car loans, or multiple personal loans.
Simplification
Managing a single loan as opposed to multiple loans will greatly simplify your time cost and hassle.
It means you will only need to remember to make one payment per period (month, fortnight or week) and remember one payment amount.
Other Issues
Lower repayments
It is possible that the interest rate on the new consolidated loan is lower than the previous loans. In which case your interest cost could be lower.
You might also have the opportunity to increase the time over which the loan is repaid.
Higher Interest
This could have the effect of reducing the level of repayments below current levels. However by increasing the length of the loan you may end up paying more interest.
Generally speaking if the interest rate is the same, the shorter the loan period the higher the monthly or weekly repayments. Correspondingly, the longer the loan term, the higher the overall interest cost will be.
A debt consolidation specialist will be able to help you choose a solution suitable for your situation and help with the paper work involved with rolling over any debts to a new loan.
Fees
A debt consolidation loan will attract fees like any other personal loan. You should find out what these are before making any decision.
Get Advice before taking action
Before taking any action it is recommended that you seek advice from suitably qualified advisers.
