If you’re feeling weighed down by the amount of debt you have and the number of repayments you’re trying to manage each month, debt consolidation could be the answer. Debt consolidation rolls multiple high-interest debts into a single payment which could help reduce your total debt over time and ensure you pay it off faster. Not convinced? Here are 5 ways consolidating your debt makes financial sense.
1. Manage Payment Deadlines
By combining all of your debt – like credit card payments, car loan payments, or any other high interest short term debt – into one lump sum, you only have to worry about one regular repayment each month. That could help you manage your repayments more efficiently and ensure you don’t miss any repayments.
2. Lower Interest Rate
With multiple smaller debts, the interest rate you’re being charged for each debt could vary quite significantly. Personal loan rates are usually charged at around 29.95 per cent p.a. while credit cards are generally charged at around 24.95 per cent p.a. You may be able to consolidate all of your debt into one loan amount at a much lower interest rate which means you could pay back your loan much faster without the exorbitant interest charges.
3. Regular Fixed Repayments
Consolidating your debt could help you manage your finances better and stay on top of your budget each month. With a debt consolidation loan, you’ll know how much you need to repay each month with a regular fixed repayment amount so you can budget to ensure you have the right amount.
4. Improve Credit Score
Missing payments or making late repayments negatively affects your credit score. A low credit score could mean you’re charged higher interest rates or make it difficult for you to secure credit in the future. By maintaining regular repayments and avoiding missing any repayments, you can help improve your credit score.
5. Reduce Your Stress
Money is a source of stress for many New Zealanders. It’s tempting to bury your head in the sand and ignore the mounting debt, but tackling your debt head on could help reduce your stress in the long run. Consolidating your debt could help simplify your finances and take away some of that financial burden.
Combining your existing payments into one repayment at a far more manageable interest rate could help you get debt-free faster. If you’d like to find out more about the benefits of a debt consolidation loan, get in touch with one of our advisers so we can help simplify your money management.
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