N.B: Debt Mediators does not provide debt consolidation loans. This information is provided for information purposes only.
Debt Consolidation can be done in a number of ways . The basic idea is to replace some or all of your debt with a single debt. A single regular payment is easier to manage. You could end up paying less due to a lower interest rate.
What types of Debt Consolidation are available?
Unsecured personal loan.
When most people think about debt consolidation they think about unsecured personal loans. One large personal loan is taken out to consolidate a number of smaller loans such as credit cards and payday loans. The money from the loan is used to pay out your creditors.
The main benefits are: a lower interest rate, one regular repayment, and a shorter term. If you are consolidating credit cards the interest is likely to be significantly higher than a personal loan. Depending on the difference between the credit cards and the new debt consolidation loan, there may be an overall saving as well as being able to better manage a regular monthly payment.
To get a debt consolidation loan you would need to:
- Have a perfect credit history;
- Have been in the same job for more than 1 year;
- Have less than $50 000.00 in debt;
- Be up to date with all your debts; and
- Generally pay an application fee.
CAUTION: If spending is a problem, a debt consolidation loan may make things worse. We regularly see people who, after getting a debt consolidation loan, continue to use their credit cards.
Debt Consolidation Summary
Debt consolidation can provide certainty. Ensure that the new debt consolidation loan is within your means to pay. Be aware that debt consolidation may increase your debt through fees and charges. The main benefit of debt consolidation is having a manageable payment over a longer term.
Equally important is to ensure that no further debts are added to the load. So after you get your new debt consolidation loan be sure to cut up all your credit cards and write up a budget.
