Understanding Debt Consolidation Loans?
What Are Debt Consolidation Loans?
A debt consolidation loan combines some or all of your existing debts, including existing debts such as credit cards, personal loans, car loans and other high-interest loan products, into one loan.
What Are the Benefits of Debt Consolidation Loans?
While it makes it easier to repay your debts, an added benefit is, if you take out a loan with a lower interest rate than what you’re paying on your existing products, you could reduce your overall debt.
Another benefit of having all your debts consolidated into a loan is that term loans are repaid over a fixed term, so you have a clear timeline for when you can be debt-free.
We take a look at how a debt consolidation loan helps Penny in our video below:
How Can A Mortgage Broker Help You with Debt Consolidation Loans?
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We compare loans from various lenders to ensure you are getting the best deal.
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With banks clamping down on applicants with stricter lending rules, you’ll want your application to be perfect. We take care of all the paperwork!
Debt Consolidation Loans FAQs
Could I End Up Accumulating More Debt a Debt Consolidation Loan?
If the personal loan is more expensive than your existing debts, you could accumulate more debt through interest and fees.
So, it’s super important to compare the interest rate and fees of any new loan you’re considering against your current debts.
To avoid making the wrong decision, it may be helpful to chat with a mortgage broker – especially if there is a home loan involved. As a go-between for borrowers and lenders, mortgage brokers can play a useful role in accessing more loan options for you.
This way, you can compare interest rates and see if debt consolidation would be in your favour or not.
Will a Debt Consolidation Loan Hurt My Credit Score?
While opting for a debt consolidation loan can lower your monthly payments, it’s likely to cause a decline in your credit score.
However, as long as you stick to your payment plan and don’t accumulate more debt, the overall result is positive.
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