Every month, like clockwork, you set a plan to make sure your bills are paid on time, never really expecting to see the light at the end of the tunnel of overwhelming debt. No matter how you process your payments, paying off debt, for many Australians, has become a permanent part of their monthly routine. It can often seem like a vicious cycle that seems to have no end. However, with loan consolidation, you may finally be able to break out of this cycle of never-ending payments and take back control of your finances.
Debt consolidation is one of the best ways to pay off your debts and can be used to help you pay off debts as large as a home loan to those as small as a credit card. One of the main benefits of loan consolidation is that it can reduce the total amount of the principal and interest paid each month. Furthermore, being able to consolidate your debt into one easy-to-manage payment will put you back in the driving seat when it comes to your financial future and alleviate some of the financial stress you might be under.
Let’s take a closer look at just some of the different ways you can consolidate your debt.
A consolidation loan combines all of your existing debts together. The purpose of the loan is to pull all of your debts under one umbrella payment, thereby decreasing the amount of money that is paid in interest every month. These loans are great because they lower the payment amount each month, consolidating your payments into one overall fee, as opposed to paying out on several loans each month, which add up quickly.
Some consolidation loans also come with financial counselling that can help set you on the right track to a more positive financial future. The work of consolidating the loans is done by the lender making the entire process much easier for you. One drawback, however, is that with most consolidation loans you cannot apply for any additional credit during the process and the rates charged are often higher than what they might be on other loans.
If you want to consolidate your debts on your own, you can also consider a balance transfer. A balance transfer works great for consumers whose primary source of debt is attached to a credit card. The best transfer options will give consumers zero interest on a card that will allow them to transfer their other credit card accounts to the new one. This works best for the consumer if they can pay the card off before the zero-interest time limit expires.
Borrow From Yourself
Home equity loans and lines of credit against some form of collateral, such as your home, are ways to borrow from yourself and then repay the loan. A home equity loan allows you to borrow against the value of your home by taking out a lump sum, and while the total monthly payment increases, consumers end up paying themselves back through the mortgage payment.
MoneySmart, through the Australian Securities and Investment Commission, provides consumers with some great tools for managing their debt. This site points consumers in the direction of places where they can get legal advice and financial counselling if they so choose. It also provides information about how to access credit reports and they offer solid advice on how to deal with debt collectors.
Overcoming Overwhelming Debt
Consolidation does not wipe out debt but it can help you to regain control over overwhelming debt. Being under financial strain is never pleasant and it’s important that you do what you can to gain back control over your financial situation. The good news is there is a wide range of options available to anyone who is struggling to keep up with their repayments, it’s just a matter of choosing the best option for you.