By the time you start considering debt relief options such as credit consolidation and credit counselling, you will probably have skipped one or more of your debt repayments for several months, possibly resulting in bad credit.
Fortunately, even people with bad credit can qualify for credit consolidation loan or a proposal, both combine multiple debts into a single loan with one monthly payment. The primary objective of debt consolidation is to pay off your debts and get back on track financially by eliminating the smaller loans that have high interest and replacing them with a single loan with a lower interest.
With debt consolidation, you only need to plan for one payment each month. The lower interest rate allows you to eliminate your debt faster, all while protecting your credit rating. In a proposal there is no interest just one set amount. Indeed, it is a vital financial move, but there are a few things to note before you proceed:
- Debt consolidations such as a Proposal are most beneficial if you can afford to borrow
If you have the ability to pay all your credit cards and other loans each month, consolidating those payments into a single proposal lowers or removed the interest rate on the amount borrowed so you spend less and finish paying sooner. Additionally, you save yourself the hassle of juggling multiple bills with different due dates. But when working out whether you can afford to make the agreed payments, you should account for anything that might impact your future income, like changing jobs.
- You should shop around for the best deal
It is important that you don’t rush to take out a new loan. Take your time to compare product features, interest rates, and fees and charges, analysing the long-term impact on what you have to pay. Talking to a Licensed Insolvency Trustee about your proposal options may save you from making high loan interest rates in the future and get your out of debt faster.
- You can borrow more money, but be wise about it
Credit consolidation loans may allow you to borrow more money. For instance, if your credit card debts are transferred onto your home loan, where the consolidation loan is borrowed against your home, you can borrow more money with your credit cards. Similarly, if you get a line of credit, you may get a higher borrowing limit than your existing debts. While this may give you access to more funds, it is important that you seek professional financial aid to avoid increasing your debt.
Get help if you cannot pay your debts
Keep in mind that credit consolidation loans are only beneficial if you can afford the new repayment arrangements. Assess your financial situation truthfully, and then seek help from a licensed insolvency trustee to discuss your options.