Understanding Debt Consolidation
What you need to know about Debt Consolidation
It's that time again...Wishing you a great holiday period as we creep closer to 2024!
Each year, we send out a monthly newsletter with a topic that is at the front of peoples minds following the holiday season. We're going to break down debt consolidation.
What is Debt Consolidation?
Debt Consolidation is when you have multiple existing loans which you can combine into one loan with one interest rate so that you aren't paying off multiple loans at different interest rates.
In the best situation, debt consolidating results in having one loan at a lower interest rate so you are able to pay off the loan faster and save on potential interest costs.
Advantages
- When consolidating, the repayments tend to end up being at a lower interest rate over a longer period. This results in smaller re-occurring payments.
- A huge benefit is having all loans combined into one making your finances easier to manage with one easy payment.
- Depending on the provider, there may be flexible repayment options and some providers may not charge any additional fees.
Disadvantages
- Debt Consolidation may only be a short term fix should your financial situation change, leaving you unable to meet the repayments of the new loan.
- There may be additional fees surrounding the process such as adding another set of establishment fees when consolidating the loan on top of the fees you paid initially on each loan.
- If you choose to consolidate your loans through a company rather than the bank, they may charge you a higher interest rate.
If this has got you thinking about your options when it comes to your personal finances, please feel free to get in touch today and we can create a tailored plan that will be best suit your specific financial situation.
I look forward to hearing from you.
Fiona
