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Written byShaun McGowan
Are you feeling overwhelmed by debt?
If you’re starting to lose track, debt consolidation could be the answer.
Consolidating your debts should make them:
Of course, debt consolidation isn’t for everyone.
Below, we’ll cover off all the things to look out for and keep in mind so you can simplify your debts.
The first way
Let’s say you’ve got five different debts and...
You’re making five different payments at various times of the week or month.
Add rent, bills, streaming subscriptions, direct debits and other ongoing expenses and...
It’s very easy to feel overwhelmed and lose track of where your money is going.
Debt consolidation allows to take all those repayment amounts and different dates and merge them into a single loan.
One amount. One repayment.
$45.66, $59.14, $104.94 and $130.26 on the 3rd, 9th, 15th, and 28th of the month, all charging different rates of interest and fees for missing payments...
$340 (or less!) once a month.
On the day of your choosing, with a single interest rate.
The second way
Use debt consolidation to extend the term of your repayments.
But keep in mind, this may not save you money.
The longer you take to pay off your loan, the more you’ll end up paying in interest.
However, it could allow you to free up cash or simply breathe easier in the short term...
Because extending your term means your repayments will be lower.
And, if you decide you are in a better place a little way down the road, you can always think about:
Joshua used a debt consolidation loan to get a handle on his debts. His debts were:
He was finding it harding it hard to ensure he still had money on each of the different payment dates. Joshua chose a debt consolidation loan with:
So, now that you want to consolidate your debt, you’ll want to keep three important things in mind when comparing or choosing a loan:
Find the lowest rate debt consolidation loan you can with no fees.
When comparing debt consolidation loans and rates from multiple lenders, use a comparison rate to ensure you are accounting for all costs.
The comparison rate expresses the true cost of a loan (Interest plus fees) as a simple percentage.
The four types of fees you should be aware of when comparing lenders for a debt consolidation loan include:
Upfront and Ongoing fees are included in the comparison rate. However, variable fees - such as late-payment fees - are not, so be sure to keep these in mind when comparing deals.
If you can’t find any loans to compare, a personal finance broker can assist in finding you a suitable deal and completing your application.
Brokers operate all across Australia — whether you need a debt consolidation loan in Adelaide, Newcastle, Sydney, Canberra, Brisbane, Melbourne, or Perth, you'll be able to find one who can help you.
Lenders love boring, or should we say, consistency!
They love it if you've had the same job forever and have been at the same house since you first left home.
Here's an example of how your employment history can influence your approval.
Here is how your credit history can influence your ability to be approved.
Debt can be expensive, financially and mentally.
Debt consolidation can be a great tool if you:
You can also speak to a financial adviser before committing to a debt consolidation loan.
These financial experts can assess your current situation and advise you on what will or won’t work in your current circumstances, and also help you find a great loan.
Once you’ve applied for a debt consolidation loan and you’ve been granted approval, the lender may do one of two things:
Either way, you’ll want to repay and cancel your existing debts as quickly as possible to save on interest charges.
If you’re only consolidating credit card debt, simply repay your credit card debt, cancel the card, and you’re good to go!
You can apply for a debt consolidation loan in Australia if you are:
If you meet the basic eligibility for a debt consolidation loan, you will then need to compare lenders and assess their individual approval criteria.
Most lenders will make the consolidating of your debt super easy:
You may be able to get a debt consolidation loan if you have bad credit, but your lender’s credit policies will apply. Generally, non-bank and specialist lenders have relaxed credit policies, so your chances may be better if you apply with them.
Not usually. Provided you meet the lender’s credit criteria, your debt consolidation loan should have a similar interest rate to comparable personal loan products.
Yes, most lenders offer unsecured debt consolidation loans. These may have higher interest rates than secured loans but won’t require you to use your assets as security.
If you manage your debt consolidation loan well, it shouldn’t hurt your credit score. In fact, it could help improve it — make repayments on time every time, reduce your total debt, and avoid submitting multiple applications.
Every case is unique and the answer to this question will depend on the circumstances of your home loan and debts. However, because home loans generally have longer terms than other forms of household debt, consolidating other debts into your mortgage could end up costing you more in the long run.
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With most debt consolidation lenders, they operate throughout the country. Whilst most are located in the major capital cities like Perth, Sydney, Melbourne, Brisbane, Adelaide and Hobart, they often have local representatives across the smaller cities as well.
All the lenders we work with have Australian based teams. So rest assured, when arranging your loan you'll be working with a lender in Australia.
Shaun is the founder of Money.com.au and is determined to help people pay as little as possible for financial products. Through education and building world class technology. Previously Shaun co-founded CarLoans.com.au and Lend.
Information about borrowing rates The rate advertised are comparison rates. See below for further information about comparison rates. Using our lender SocietyOne as an example Tier 1 borrowers will receive an interest rate between 5.95% - 10.49% p.a. (comparison rate 5.95% - 12.83% p.a.). Tier 2 borrowers will receive an interest rate between 9.99% -12.19% p.a. (comparison rate 12.05% - 15.03% p.a.). Tier 3 borrowers will receive an interest rate between 11.99% - 15.99% p.a. (comparison rate 14.37% - 18.62% p.a.). Tier 4 borrowers will receive an interest rate between 14.99% - 19.99% p.a. (comparison rate 18.41% - 21.70% p.a.). The maximum annual percentage rate (APR) interest rate is 19.99% p.a. (comparison rate 21.70% p.a.). An establishment fee applies for most borrowers. Personal loan example: for a borrower with excellent credit (Tier 1 borrower), a loan of $10,000 over a 3 year term, with an interest rate of 8.99% p.a. (comparison rate 12.32% p.a.) and a $495 establishment fee, the fortnightly repayment would be $154 and the total cost over the life of the loan (including the establishment fee) would be $12,013. SocietyOne personal loans are available for terms of 2, 3 and 5 years. Minimum loan term repayment period is 2 years, maximum loan term repayment period is 5 years.
*Information about comparison rates Comparison rates are designed to allow borrowers to understand the true cost of a loan by taking into account fees and charges, the loan amount and the term of the loan. The comparison rate is based on an unsecured fixed rate personal loan of $10,000 over 3 years. WARNING: Comparison rates are true only for the examples provided and may not include all fees and charges. Different terms, fees or loan amounts might result in a different comparison rate.