Debt consolidation loans in Australia can offer people a range of different benefits. Yet the vast majority of people assume debt consolidation loans are only for people with financial difficulties.
Before you scroll away and think you don’t need a consolidation loan, take a look at some of the benefits you could be missing out on.
Rolling all of your outstanding debts into one convenient loan can make it easier to streamline your finances. For example, if you have a car loan, personal loan, credit card balance, store card balance or a hire purchase agreement, it may be possible to roll them together into one easy loan.
Instead of focusing on multiple repayments each month, you only need to worry about one payment.
Lower Interest Charges
If you take a close look at the interest you pay on your outstanding credit card balances, you might be surprised. A debt consolidation loan usually charges a much lower interest rate, so you’re saving money.
Lower Monthly Repayments
If you add up how much you currently pay on all your outstanding debts, the figure might surprise you. Rolling those debts into a new loan could easily reduce your monthly repayments and free up some of your disposable income.
Faster Debt Reduction
When you make just the minimum repayment on your credit card each month, you’re only covering the interest charges, plus a small amount towards paying down your debt a little.
By comparison, a debt consolidation loan is an amortised loan, so your repayments are calculated differently. Each time you make a payment, a portion of it covers the interest charge, and the remaining portion reduces your debt balance.
Each time you make a repayment, you know you’re paying down your debt much faster.
Increased Borrowing Capacity
If you’re thinking about buying a house in the near future, consolidating some of your outstanding debts could make it easier for you to afford the home you want. When banks assess your ability to repay a mortgage, they take into account the current repayments you make on existing debts, plus the full credit limit of any credit cards you have.
When you roll all your personal debts into one convenient loan, you could potentially increase the amount of money the bank might allow you to borrow.
If you’re committing a large portion of your income towards keeping up with repayments on car loans, personal loans and credit cards, it means you’re not focusing on your financial future.
While personal debts have their time and place, it’s worth noting that they’re non-deductible debts. Likewise, as most personal debts are for depreciating items, like cars, boats, holidays, or other personal things, they also don’t usually contribute to building assets for your financial future.
Consolidating your personal debts can help reduce your interest, reduce your monthly repayments, and free up your income, so you can start focusing on building wealth for your future.
With so many benefits to take advantage of, take a moment to consider whether a debt consolidation loan might help you achieve your financial goals.