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A debt consolidation loan can help simplify debts by putting everything in one place and even lowering your payments.

This can be a big step towards a better financial future, and we want to help you get there. Continue reading for more information regarding debt consolidation.

What is a Debt Consolidation Loan?

A debt consolidation loan refers to a single loan intended to consolidate various debts. This can be completed through the use of a personal loan. It’s a great way to simplify your debts, get out of high interest loans, and pay down existing debt.

By switching to a debt consolidation loan, you could combine as many as six or seven different debts into one single payment. Not only does it make it easier to manage, but it could reduce the amount of money you’ll pay in interest over time as well.

When Should I Consider Debt Consolidation?

There are a number of reasons to choose a debt consolidation loan to manage debts. Let’s outline some of the main ones:

You Have Multiple Debts

If you have multiple credit cards and various outstanding loans, a debt consolidation loan can be a great way to get all of these debts put into one loan so making payments is simpler. This makes your debt more manageable and easier to track.

You Can’t Make The Payments

A lot of people think that because they’re unable to make on-time payments on their debts that they won’t be eligible for a debt consolidation loan. That isn’t true. If you’re struggling to pay off a number of different loans, combining that into a debt consolidation loan can help you get back on track.

You Need a Cheaper Monthly Payment

Consolidating your debt into one single payment can actually make the payments lower because you won’t have to pay interest on five or six different loans. As a result, the interest is lower and your payment may be lower as well.

Benefits of Debt Consolidation

Debt consolidation is a great strategy to help you simplify your debts and improve your overall financial situation. Here are some of the main benefits of a low rate debt consolidation loan.

Improve Your Credit

You can expect to see an increase in your credit score when you take out a debt consolidation loan for a few reasons.

First, you’ll be reducing your credit utilisation by decreasing the amount of maxed out or highly utilised lines of credit.

For example, if you had 3 credit cards that were at 75% utilisation, you could take all three of them and consolidate them into a loan. That would pay them off entirely and add a loan to your credit report.

This could result in an immediate dip in your credit when the score is run and the hard inquiry pops up, but it’s only temporary. Over time, your credit score will begin to go up as you make on time payments on the loan.

Faster Payoffs

When you’re consolidating credit cards, you may have high balances that could take years to pay off because there is no definitive “payoff” date.

By using a debt consolidation loan, you’re provided with a direct set number of payments and a date that you can expect to pay off the loan. Multiple factors like income, credit score, and loan period are factored in to determine how long you should have to pay it off.

Less Stress

Credit card debt can be stressful. It’s important that you take care of this not only for your financial health, but your overall well-being.

If you manage debts through a debt consolidation loan, you’ll reduce your stress by eliminating a high number of open lines of credit and putting them all in one place. You’ll feel more empowered and more in control of your life.

How Do I Consolidate My Debts?

Depending on your situation, there could be a number of ways to consolidate your debts. Our repayment calculator can help you determine which option might be right for you.

Debt Consolidation Personal Loan

A debt consolidation personal loan is when you take out a new loan at a lower rate to help pay off other debts. This can be used on pretty much any debt, including credit cards, car loans, and student loans.

Balance Transfer Credit Card

This consolidation method is limited to credit cards and doesn’t typically allow for high amounts over $10,000. But, if you have a lot of small balance credit cards, you could transfer that debt to one single card with 0% introductory interest in most cases to help you pay it down.

Mortgage Refinancing

If you’re trying to consolidate a mortgage, you can use the equity in your home as a line of credit to help pay down debts. You can also refinance at a lower interest rate to reduce your repayments.

How Can I Consolidate My Debt if I Have Bad Credit?

Getting a debt consolidation loan with a bad credit rating isn’t impossible, but it’s a bit more difficult. There are options available regardless of your credit because our goal is to help you become more financially secure.

Unsecured Personal Loan

We have lenders that specialise in offering unsecured personal loans if you have bad credit. These will have high interest rates but depending on the type of loans you have, it still may result in a lower repayment.

Part 9 Debt Agreement

A debt agreement is a type of bankruptcy and is the only option you have if you have a lot of debt that you can’t afford and are ineligible to receive various debt consolidation loans. We’ll work with you to negotiate with the lenders to absolve the debt but this will stay on your credit report for five years and can make it difficult to get credit in the future.

Speak to a lending specialist at Fox Finance Group today, for a no obligation assessment of your finances. We can help you get on top of you debts by applying for a debt consolidation loan.

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