If you are anything like us, you may find paying off a single debt an easy affair. However, the whole circumstance becomes a lot messier when dealing with multiple forms of loans.
So, how do you solve this issue without endangering your budget?
Well, in that case, it would be better for you to consider the option of consolidating! Here’s what you need to know regarding this aspect.
Debt Consolidation – A Brief Overview
A debt consolidation loan is when you combine all of your debts into a single payment and pay everything at once!
Hence, by doing so, you can simplify your bills without getting into any legal troubles. In addition, if you’ve qualified for a low rate, you’ll also have to pay less interest and get out of your enormous debt faster.
Seems like a no-brainer, doesn’t it?
If we judge from a linear ground, debt consolidation will sound like the right move. Nonetheless, if you’re not really accustomed to it, you may end up making a grave mistake.
Hence, we’d ask you to go through the next section in case you were seeking some assistance in this aspect.
What Should You Know About Debt Consolidation?
Like anything else, debt consolidation, too, has a negative and a positive side. And, to help you out, we’ll discuss both of these aspects in this section. Let’s get started!
Here are some of the positive characteristics of debt consolidation that you should know about –
The Loan Tenure Is Selectable
The primary aim of loan consolidation is to make your loan payment situation more manageable and controllable. Therefore, when you are looking at such a plan, you’ll have the opportunity to select the preferred tenure.
If you ask us, we’d recommend you consider it like any other loan and pay everything off as soon as possible. If you don’t want to lose a large chunk of your monthly savings, you can always go for the longer terms.
Nonetheless, you may end up paying more this way than you were supposed to!
- Lower Interest Rate
Sometimes, you may have to take another loan to pay off the existing ones in debt consolidation. Yes, we know it doesn’t really sound what you expected, but it can help lower your overall interest rate.
Usually, in Singapore, you have to pay around 20% to 27% (per annum) interest rate while taking care of your personal debts. Nevertheless, the same can come down to somewhere between 7% to 10% (per annum) with debt consolidation.
Boosts Your Overall Credit
Frankly speaking, a debt consolidation loan will reduce your overall credit score initially. Nonetheless, you’ll have to work with a hard credit inquiry later on in this aspect. This way, your overall credit score will begin increasing again.
The whole situation will be even more beneficial for you if you’re making on-time payments for your loan. Additionally, you’ll also have to keep your payment history in proper shape, as it’ll influence the calculation of your credit score.
In essence, the negatives of debt consolidation aren’t too significant or complicated in any sense. However, you will still need to know them before making any commitments.
Some forms of debt consolidation loans usually come with some additional fees. These may entail –
- Annual fees
- Balance transfer fees
- Closing costs
- Loan origination fees
Thus, enquiring your provider about the supplementary fees beforehand can be pretty beneficial for you!
Does Not Solve Financial Issues
A debt consolidation loan can help you lower your overall interest rate and monthly payments to some extent. Nevertheless, it won’t solve your fiscal problems on its own.
Therefore, you will need to find a way to cure your financial or overspending habits. Taking the help of an expert might be beneficial for you as well!
Managing loans, especially if you are dealing with quite a few, can be a headache. Hence, opting for debt consolidation would be the best idea if you are looking for an easy way out.
Hopefully, we could inform you a little regarding the said subject through this article. However, if you still have any queries, you could try working with a specialist too!