Having several personal loans, credit cards or store cards is not rare. However, many people find managing these multiple debts a challenge, as they each have different interest rates, payment schedules and repayment values. If you’re beginning to struggle with managing multiple debts. it may be worth considering debt consolidation before you fall behind on any repayments.
What is debt consolidation?
Debt consolidation is combining all your existing debts together into a single and easier to manage new loan. This can help you better manage your repayments and give you a clearer picture of your financial future - and importantly, a path to being debt free. You would typically do this by taking out a new personal loan to repay your other existing debts, and then paying this new loan back over an agreed term.
How does debt consolidation work?
If you have two different credit cards and a car loan with debts of $2,000, $5,000 and $10,000, you’re likely to also have different interest rates for each and need to make three different repayments at different times each month.
This complexity can be hard to manage, and makes budgeting and planning harder than it needs to be. This scenario could be costing you more in interest payments than it needs to, especially when different loans have different interest rates. With interest rates on credit cards often up around 20% p.a., you could be struggling to pay off the interest as well as the actual credit card debt.
In the scenario above, consolidating these debts into one personal loan with a competitive interest rate to pay off both credit cards, the car loan and all outstanding interest could help simplify your financial position. The new personal loan will have single repayment to make a set period of the loan – you can usually choose whether to make repayments weekly, fortnightly or monthly to best fit with your situation.
Best of all, if the interest rate on your new personal loan is cheaper than your current debts, your repayments will be lower, enabling you to pay off the loan faster or have a little extra in your account each month.
Benefits of consolidating your debts
If you’re feeling overwhelmed by your debts, remember to act early. The sooner you act, the easier it will be to find a solution. If you’d like to discuss your options, give one of our friendly team a call to discuss your options.
Want to apply for a Gateway Bank Debt Consolidation Loan online? Use our simple and easy online application, and make sure you have the following information ready to speed up your approval:
- Your living expense figures
- Details of your assets, income and liabilities
- Statements for the last 3 months for your assets & liabilities
- Your last payslip or evidence of income statement