If you're looking to simplify your debt, consolidating your loans could save you money in the future.
Outside of a mortgage, many of us have more than one debt: perhaps a car loan, and one or two credit cards - each with their own interest rate. Over time this could see you paying back thousands in interest, and all at different interest rates.
Streamlining some of your debts and consolidating them into one manageable loan could reduce your total repayments and help take the stress out of managing your finances.
It's important to familiarise yourself with different loan types and their product features - understanding the world of finance can be complex so we've tried to make it easy.
Secured vs. unsecured loans
Taking out a debt consolidation loan that is 'secured' (secured against an asset like your car), means that you are able have a single loan with one regular repayment in order to pay off your other debts. Another advantage of a secured loan is that you may be eligible for a lower interest rate.
If you don't have a suitable asset to secure your loan against, you may decide to apply for an unsecured loan. This will also allow you to streamline multiple debts into a single loan with one regular repayment.
Establishment costs and early termination fees
When you're looking to combine loans, read the fine print - in most cases there will be mandatory fees.
Establishment fees are also known as a set-up, start-up or an application fee, and these charges normally vary depending on the lender. Early termination, exit or break fees may also apply. These fees are normally incurred if you decide to pay off your loan early.
Details on fees should be listed on loan product websites.
Tips for getting it right
Here are a few things to consider when making sure a debt consolidation loan will work for you:
- Work out your expenses and plan a weekly/monthly budget to determine how much you need to borrow.
- Take your time and do your research. Your new loan should simplify your repayments, not make them more complicated.
- Compare interest rates to make sure you're getting the best deal.
- Compare set up costs and associated termination fees.
To find out more about consolidating your debt, or to start an application - click the button below or call to speak to one of our loan specialists.