This maybe something you consider if you are:
- Struggling to manage several debts, losing track of which repayment is due and when.
- Falling into a credit trap, using all of your spare income to just pay the interest and not having enough left over to pay down your debt balances.
- Paying a very high interest rate on your debts, such as credit card, cash advance or store credit purchases.
If any of the above sound a bit too familiar, several strategies will enable you to bundle your debts into one easy package. These include:
- Moving debts to a credit facility with lower interest rates or less fees, such as a personal loan or home loan.
- Extending the term of existing loans (e.g. taking a mortgage debt back out to the 30-year loan term).
- Changing the repayment terms on an existing loan to interest only, or
- Combining the above strategies.
If you implement a debt consolidation strategy, it’s important to understand that it doesn’t reduce your debts, it just makes your repayments more manageable. A debt consolidation strategy should be implemented in combination with a change to your spending behaviour, so you can work to reduce your overall debt level over time. This should include creating a budget to ensure the debt consolidation measures work effectively and using a budgeting tool such as the Gain Financial Budget Calculator.