Drowning in debt? There are solutions.
If you are looking for a way to manage your debt more effectively with lower repayments, lower interest rates, or a shorter term loan, debt consolidation may be the right choice for you.
In this article, we’ll discuss how to consolidate debt in a way the benefits you now – and in the future. Let’s get started.
What is debt consolidation?
Debt consolidation is the process of rolling all of your current debts into one single loan. People use a debt consolidation loan to achieve a variety of financial goals, such as increasing cash flow or paying off debt faster.
For the most part, this debt management strategy can be incredibly beneficial, especially if you are dealing with high-interest debt, such as credit card debt. It’s essential, however, to remember that some debt consolidation loans can make your situation worse. For example, if your new loan has a higher interest rate than your existing debts.
How to consolidate debt in three steps
Here’s our three-step guide to consolidating your debt. Follow this to determine which – if any – debt consolidation solution is right for you.
Step 1: Get a clear picture of all existing debt
Managing your debt effectively starts with gaining a clear picture of your existing debts. You’ll want to uncover the following information about each of your debts:
- How much do you currently owe?
- What interest rate are you paying?
- What are the monthly repayments?
- Are there any break fees? If so, how much do they cost?
Step 2: Determine how much can you afford to pay each month
Now, it’s time to work out just how much you can realistically afford to put toward your debt each month. This may be less or more than you are currently paying – either way, be honest with yourself.
You can use this information – as well as any other financial goals – to decide what you’d like to achieve from consolidating your debt.
If you can afford more than you are currently allocating to debt repayments, your aim may be to rid yourself of debt sooner. If you are struggling to meet your repayments, your aim will more likely be to reduce repayments with either a lower interest rate or longer-term loan.
Step 3: Explore debt consolidation loans
At this point, you should have a solid understanding of how much you owe, how much you can put toward your debt repayments each month, and what you hope to achieve by consolidating your debt. It’s time to explore debt consolidation loans.
A personal loan is a great option to consolidate debt for many individuals. Personal loans have fixed terms, meaning that repayments are calculated to ensure that all outstanding debt is cleared at the end of the loan period.
Opting for one, easy-to-manage personal loan may deliver the following benefits:
- Lower interest rates
- Fewer fees
- Streamlined banking experience