Debt consolidation essentially takes your existing loans and finance facilities (such as different credit cards you have, loans, hire purchases, overdrafts, etc.) and merges them into one loan. The problem with a lot of credit cards, hire purchases, loans, etc. is that they can have high interest rates. For example, credit cards sometimes have interest rates around 25%, and many loans can also be expensive. These loans and facilities are also not a great look, and make it hard to manage your finances.

When you put these into one new loan it becomes easier to manage. Essentially these many different messy debts merge into one, making it a more attractive proposition for a lot of people. It can also bring down the repayments you make depending on how it’s structured.

Not necessarily. A lot of people are able to get a debt consolidation loan without owning a house. This means setting up a loan not related to a home loan. This is a popular way of consolidating your debts. It can also be used by aspiring home buyers who want to better manage their finances.

The repayments and interest rate are typically heavily influenced by your profile and credit history. Someone with stable employment and a great track record of paying debts on time is likely going to get a better result than someone who constantly misses payments. If you are constantly missing payments, you might need to get on top of those issues first before applying for debt consolidation. Your credit history does not have to be perfect to get a debt consolidation loan, but it needs to show a stable situation of some sort.

Generally the repayments are lower than what a person is paying right now. Debt consolidation can be a more favourable option and provide more time to pay off the debts, making the weekly instalments lower.

If you have a home loan, then you may want to consider having your debts such as credit cards, loans, hire purchases, etc. brought into your home loan. One of the key advantages of this is that you might be paying a much lower interest rate, such as 4 or 5%. That can translate into a massive saving, compared to paying 15-35% on other types of loans and finance facilities. It is worth also reviewing if debt consolidating in the home loan is right for your situation; it is not a ‘one size fits all’ answer, however it is worth looking into.

Contact us if you are interested in applying for debt consolidation. We provide debt consolidation services and we make the process easy to understand. The process may involve completing a form and providing some documents such as payslips or bank statements, but it is all worth it in the end if it means better finances!

Over time we have found that we get better, or cheaper, results for consolidations, as your matter can be looked after by a professional financial adviser. This can mean a better result rather than just going straight to a finance company or bank. Have a chat with us about guiding you through this process.