When you consolidate all of your debts, you’ll have one loan repayment instead of several to worry about.
A Debt Consolidation loan offers reduced interest and fees but you also have to consider refinancing costs and early payout fees from existing loans, to see if the cost of refinancing is worth it.
If you have bad credit and a large amount of debt, these types of loans can help you take back control of your finances.
If you are having trouble keeping up with monthly repayments and if you have equity in your home, the interest rate of your home loan, will be considerably lower than a personal loan or credit card, so debt consolidation may be a viable option ( Home Equity Loan).
If you do get a Debt Consolidation mortgage and fail to make timely payments, you give the lender the right to foreclose on your property.
A balance transfer credit card may also be an option for you to consider, if you have a low-interest credit card with available credit. These cards let you pay 0% p.a for a set period for balances transferred.
So what debts can be consolidated?
- Personal Loans
- Credit cards
- Store or charge cards
- Private loans
- Debts to utility companies
Some lenders may charge repayment penalties if you pay your loan off earlier than agreed and if you get a home equity loan, you may have to pay application fees, valuation fees, legal fees and stamp duty.
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