08 NOVEMBER 2018
The Power of Debt Consolidation Loans to Improve Budgeting
Debt can be a tricky beast. It seems like these days there is more and more to pay for, while money gets tighter and tighter. Between car loans, Christmas, personal loans and credit cards, the loans (and their interest payments) can spiral out of control.
For those in financial hardship, spiralling loans can be especially damaging, and can interfere with your ability to provide for yourself, or your family. With Christmas around the corner (which we know is always a stressful time), it pays to stay on top of your finances, in order to give yourself the freedom you deserve.
Debt consolidation loans are one tool you can use in order to gain back that freedom.
Understanding debt consolidation loans
There is an easy answer to improving your budgeting and stay on top of your debt: use a debt consolidation loan. Put simply, a debt consolidation loan means taking out a new loan, to completely pay off your existing debt from various different loans. In essence, it combines your existing forms of debt into one loan, with one payment instead of many.
By using our budgeting tips and a debt consolidation loan, it is possible to get out of debt faster, getting you back on your financial feet sooner. However, it is important to understand the pros and cons of using a debt consolidation loan before you dive in.
The benefits of debt consolidation loans
- Combining existing loans (with varying interest rates) into one loan (with a single interest rate), can help budgeting. With a single loan, you can track repayments easier, and see your progress toward reducing debt at once. It’s simple: with one easy-to-manage loan to one creditor, instead of many loans to many creditors, you are simplifying the way you pay your debt or bills.
- Typically, debt consolidation loans will have a lower interest rate, and longer repayment terms. This allows you to restructure your budget due to the smaller repayments, potentially freeing up cash which can go toward other things.
The downsides of debt consolidation loans
- Time – longer repayment terms may mean you will be paying off debt for longer. If your goal is to get out of debt as quickly as possible, longer repayment terms on a debt consolidation loan may force you to pump the brakes on your financial plans!
- Total cost. Lower repayments over a longer period could mean the overall cost of your debt is greater than if the loans remained separate. Additionally, some loan repayment terms have penalty fees if paid off in full early! This, again, could add to the total cost of your loans.
- Habit change is required. If your goal is to get out of debt, then the natural solution is to increase payments and decrease spending. But if you keep spending on your credit card, for example, you will simply be adding more debt to pay.
Is debt consolidation right for you?
Debt consolidation loans are a powerful tool which can be used to combine a number of different loans into a convenient package. Ultimately, you will be saving time and effort. However, it pays to know the ins and outs of debt consolidation loans, and how it can work for you before you make the jump.
If you are considering debt consolidation as a way to get back on top of your budget, make sure you talk to one of the friendly team at Superloans. At Superloans, we can help you plan ahead, and discuss how we can make debt consolidation can work for you.