Debt Consolidation: Everything You Need to Know
Debt consolidation might sound complicated – anything to do with managing your money can seem a little scary. Plus, what does ‘consolidation’ actually mean? In reality, it’s all quite simple and can make money management easier too.
A debt consolidation loan is an unsecured personal loan you take out to replace multiple existing loans. Debt consolidation loans are most often used to combine credit cards, personal loans and other high interest debt.
Applying for a debt consolidation loan is much the same as applying for any other personal loan:
- You’ll fill out an application form
- You’ll provide documents such as ID and bank statements, and details on your current loans
- If you have bad credit, we still might be able to help with a loan – you’ll just need to fit some other lending criteria and be able to afford the repayments
- Your interest rate will be determined by a few factors of your application, including your credit rating.
So, why consolidate your debts?
Firstly, it keeps things simple. Done right, it can also help you pay off debt sooner. There’s a number of benefits to consolidating your debt:
- Having one easy payment makes you less likely to default on repayments, which can only help towards your credit rating
- Your new loan can often be spread over a longer period – making the repayments smaller
- When combining multiple loans, you can often get a lower interest rate
- Just one payment for all loans makes it easy to budget and manage your other expenses
- Knowing exactly how much you pay and a set date it will be paid off means you’re more likely to be motivated to get debt free