What is loan consolidation?
Loan consolidation is a debt management process that can be useful for individuals who are struggling to repay multiple debts.
Loan consolidation allows you to merge multiple debts into one loan to lower your monthly payments. The type of loan that you get may be secured or unsecured. The financial institution that you choose may be able to negotiate a lower interest rate on your behalf as well. Loan consolidation is a simple way of gaining control of your finances.
When you should consider loan consolidation:
When you are over-indebted
This means that the amount of money that you are paying to creditors every month leaves you with so little income that you are unable to pay for living expenses comfortably. This essentially means that you have too much debt.
When you can afford the new loan payments
Before you choose loan consolidation you should keep in mind that you will be taking out a new loan, so you need to be able to afford to make repayments. You need to structure your payments in such a way that you can afford repayments.
When you can consolidate your debts into an unsecured personal loan
You need to get organised and organise all your debt to be able to make a single payment on a monthly basis.
More advice on loan consolidation:
- It’s important to get advice before you make a final decision
- You should shop around using comparison websites
- Make sure that you only use a reputable micro lending institution
- It’s a good strategy to consider using your home loan for debt consolidation
- Before you decide on loan consolidation, you can create a spreadsheet showing every creditor, with the balance owed, how much is in arrears, what the instalments are and the interest rates.