Are you struggling to pay off multiple debts? When each monthly repayment seems like one too many, you may want to consolidate your debts. Getting rid of debt and reaching financial independence are rewarding life moments.
So, can you get a loan to pay off all your debts?
Let's get to the following commonly asked questions:
People borrow money for various reasons—from medical bills to car purchases. But, did you also know you can borrow loan amounts to pay off your debt?
You should consider consolidating your existing debt if you're tired of making multiple regular repayments from your bank account to monthly debts. Debt consolidation loans might help you begin saving money for super funds and achieve financial independence.
A debt consolidation loan is like a personal loan for debt. Essentially, you take out one loan to pay off multiple debts. You then make direct monthly payments to one loan's lender.
A loan to consolidate debts will help you pay your mortgage, car loan, and credit card debt sooner.
Note: Check debt consolidation personal loan rates to ensure you get a good deal.
If you're struggling to make debt repayments each month, you should seek financial advice. Taking out one personal loan to pay all your other debts may help your situation.
It can work in your favour if you have high loan rates on several secured loans. Unlike unsecured loans, secured debts risk your valuable assets when you cannot repay them—like your car or house.
With a lower interest rate on a consolidation unsecured personal loan, you might pay less money overall. Similarly, if you have variable rate loan products, you may wish to consolidate your debts with fixed interest rates when rates rise.
When you submit a loan application, mortgage lenders consider your borrowing power. If you have multiple unpaid debts, this typically impacts your chances of being offered reasonable mortgage rates.
You may have to consider a debt agreement if you cannot get out of debt yourself.
Important: If you don't meet the lending criteria and the lender rejects your application, this could damage your credit score.
Debt consolidations are for people with multiple debts. You can pay off your credit card balance, home, car, and other personal loans.
If you don't qualify for a loan or don't like the idea of a loan for debt consolidation, there are other ways to repay your debts.
Taking out a loan may hurt your Australian credit score. However, this bad credit score is temporary. When you apply for any loan, it might cause your credit score to dip.
In addition, combining your debts into one and closing accounts might hurt your credit utilisation, which could also show up on credit reports.
Note: If you're not good at repaying debt, consider using debit cards instead of credit.
When you consolidate debt, you might relieve your financial hardship and simplify loan repayment. Use a repayment calculator to work out how much you might save.
The key benefits of debt consolidation:
The downsides of debt consolidation:
If you are considering taking out a new loan, you should use loan calculators and check comparison rates to ensure it is the right decision.
You can apply online for a debt consolidation loan. The lender will then inform you of their loan approval decision.
If you find your financial situation struggling, consider using debt consolidation to pay off debt. Check whether the rates and fees make the loan product more affordable than your current situation.
Seek professional advice to determine whether this is the right choice for you.
If you enjoy using our app, please take a moment to rate it in the App Store. Your feedback in the past has tremendously helped us at WeMoney to improve the app to help it be the best that it can be. A massive thanks to each one of you for making that happen!
Disclaimer: The author is not a financial advisor and the information provided is general in nature and was prepared for information purposes only. This article should not be considered to constitute financial advice. Accordingly, reliance should not be placed on this article as the basis for making an investment, financial or other decision. This information does not take into account your investment objectives, particular needs, or financial situation.