Multiple Loans into One Payment
If you have different debts with a number of different lenders, you may quickly find that you struggle to keep up with your repayments. This can easily become a very stressful scenario – as you battle to keep up with store cards, credit cards, and any other personal loans that you have taken out.
In some cases, there may be a simpler solution to streamline your finances, which entails merging multiple loans into one payment. This is often called ‘debt consolidation’ and means that you borrow enough money to repay all of your existing debts. Rather than having countless bills all going out throughout the month, you end up simply making a single monthly payment back to one lender. You can arrange for this debt to be repaid over a specific length of time, and the interest rate may also be lower than expensive credit cards or existing personal loans. This kind of debt consolidation can provide a simple solution to lowering your monthly payments, and reduces the confusion of dealing with lots of different financial providers. Read more to learn about multiple debt consolidation loans.
The different types of debt consolidation loans
The most common type of debt consolidation loan is a secured loan. This means that the amount that you have borrowed will be secured against an asset that you own. This usually means that the debt is secured against you home – which is why it is sometimes referred to as a homeowner loan. It is important to be aware that if you miss your repayments, your home may be at risk.
However, if you are able to make the necessary repayments, a secured loan can provide a very good way to help get your finances back on a steady footing. This is particularly the case if you owe a lot of money, or if you have a poor credit history. The fact that the loan is secured against your home means that lenders will be more willing to lend to you, even if you have previously had a poor credit rating.
When should you consolidate your loans?
Before you consider any type of finance, it is important to make sure that you are able to reliably make the repayments. If you try to borrow more than you can comfortably afford to repay, then this can quickly escalate and cause problems. Hence, before you submit your multiple loan applications, you must consider the details and terms that come along with it. Many people find themselves in this kind of debt spiral, when they use multiple credit cards and store cards, as well as using personal or payday loans. Consolidating your debt makes sense if it provides you with a saving each month.
If you choose to consolidate your debts into one lower monthly repayment, it is a good opportunity to also carefully consider how the rest of your finances are working. Look for other ways to save money, and cut your spending – to help you get back on track as quickly as possible.
What do I need to be aware of?
As with any loan, you should consider the long term implications that come along with multiple debt consolidation loans. Make sure that you carefully read the terms and conditions, and that you understand what you are expected to repay each month. Familiarise yourself with the fees and charges associated with the debt consolidation – and factor in whether there are any costs associated with early repayment of your existing debt, so you can be sure how much money you are saving.
Managed carefully, debt consolidation loans can generally be a very good way to help you get your debt and spending under control. They can reduce your reliance on credit cards, and help you to more clearly understand where your money is going each month.