Can I Take a Personal Loan for Debt Consolidation?

Can I Take a Personal Loan for Debt Consolidation?

Managing multiple debts can be overwhelming and stressful. Whereas a personal loan for debt consolidation can make it easy for you to manage your debt and pay it sooner. We’ll explain how personal loans will work for debt consolidation and what you should do before going in-depth.

What is Debt Consolidation?

Paying multiple debts at a time can be complicated and challenging. Debt consolidation can consolidate all your current debts together into one loan, helping you to have greater control over your financial situation. One of the most common methods to do this is by taking a new personal loan and using funds to pay your existing debts. As a result, you can pay back this new loan with a single set of repayments over a set loan term, giving you peace of mind that you know how much your repayments will be.

Can I Get a Personal Loan for Debt Consolidation?

If you have more than one debt, such as a loan, credit card or store card debt, then you might find yourself struggling to repay debts with different due dates, fees, and interest rates for each debt. If you are making minimum repayments on some of your debts, the interest you pay could end up costing you a lot more than the original loan amount. Debt consolidation is when you consolidate existing debt into one personal loan – giving you peace of mind that you need to make one set of regular repayments. Your aim must be to pay less in fees and get a lower overall interest rate. Additionally, you will have a transparent timeline for when you want to be debt-free.

Reasons for Debt Consolidation

The following are a few reasons to consolidate your debts:

  • If you are looking for a simple way to manage and pay your existing debts and expect to get a lower overall interest rate, then you can choose to consolidate your debt.

  • If you have more than one debt with different rates, due dates, and fees and you find it difficult to track all of them, then choose the debt consolidation option.

  • If you are facing difficulty making repayments for different debts, then you must choose the debt consolidation option.

What are the Benefits of Debt Consolidation with a Personal Loan?

The following are some benefits of taking a personal loan for debt consolidation:

  • It will become easy for you to manage debt with just one loan to repay and you can be on top of your repayments.

  • Usually, the interest rate on your new loan will be lower as compared to the rates on your existing debts, which means you can save money in the long run. If you don’t find a lower rate, you can reconsider your options.

  • Most personal loans can offer you a set of repayment plans along with the end date of the loan, which means you will have a timeline for when you want to be debt-free.

  • When you choose a fixed-rate loan, you will know how much your repayments will be. As a result, your repayment amount will not change during the life span of the loan.

  • You can choose a loan term that matches your requirements.

  • It will become easy for you to maintain a good repayment record with one loan.

What to Consider Before Debt Consolidation?

The following are a few things that you need to keep in mind before consolidating your debt:

  • Irrespective of your level of debt, knowing your borrowing power will define the maximum you can consolidate with a debt consolidation loan. You can also use a borrowing power calculator.

  • Usually, a debt consolidation loan offers a lower rate as compared to the interest rate you pay on your current debts.

  • Consider all the debts you want to bring into the one loan. In addition to this, find out if there are any extra charges.

Does a Consolidation Loan Ruin Your Credit?

If you are taking a new credit facility, then consolidating debt won’t ruin your credit. Your chosen lender will check your credit, which will be mentioned on your credit file.

Conclusion

Now that you know that you can take a personal loan to consolidate your debts. You can also speak to one of our experienced brokers at Star Homeloans if you are thinking about debt consolidation. We can help you choose the right option while helping you save money.

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