A debt consolidation loan may help some borrowers simplify the management of multiple eligible debts by combining them into a single loan. Whether debt consolidation is appropriate will depend on factors such as the total cost of the new loan, its features and your financial circumstances.
If you’ve never heard of a debt consolidation loan before, or you’re unsure how it works, the concept is straightforward.
If you have multiple debts—such as a car loan, credit card balance, medical expenses or personal loans—you may currently be making repayments to several different lenders, each with their own repayment dates, interest rates and loan terms.
With a debt consolidation loan, you apply for a new loan that, if approved, can be used to pay out your existing eligible debts. Instead of managing multiple repayments, you’ll make one regular repayment under your new loan agreement.
There are a number of reasons why some borrowers choose to explore debt consolidation.
A simpler way to manage repayments
Managing repayments across multiple lenders can be time-consuming. Different payment dates, interest rates and loan terms can make it more difficult to keep track of your financial commitments.
For some borrowers, consolidating eligible debts into a single loan may make repayments easier to manage by providing one repayment amount and one repayment schedule. Loan terms, fees and charges will depend on your approved loan agreement.
Some borrowers also find it easier to budget when they know exactly how much they’ll be repaying each week, fortnight or month.
Keeping track of payments
When repayments are spread across multiple lenders, it can become easier to miss a payment. Late or missed repayments may result in additional fees and could affect your credit history.
A debt consolidation loan brings eligible debts together under one loan agreement, giving you a single repayment schedule to keep track of.
If you’re approved for a debt consolidation loan with Rapid Loans, there are no early repayment fees, so you can make additional repayments or repay your loan early if your circumstances allow.
More predictable repayments
Managing multiple debts can sometimes feel overwhelming. Keeping track of different repayment dates and loan balances can add unnecessary complexity to your finances.
For some borrowers, consolidating eligible debts into a single loan may provide greater certainty by replacing multiple repayments with one regular repayment under a fixed loan agreement.
With fixed repayments over an agreed loan term, you’ll know what repayments are due and when they’re due, provided all repayments are made in accordance with your loan agreement.
Is debt consolidation right for you?
Debt consolidation isn’t the right option for everyone, but for some borrowers it may help simplify the management of existing eligible debts.
If you’re considering a debt consolidation loan, our team can explain how the process works and answer any questions you may have.
Learn more about Debt Consolidation Loans, apply online, or call 1300 727 431 to speak with one of our loan consultants.
Disclaimer: This article provides general information only and is not financial advice. It does not take into account your personal objectives, financial situation, or needs. You should consider whether the information is appropriate for your circumstances and seek independent professional advice if needed. All applications are subject to Rapid Loans’ credit eligibility criteria. Approval is not guaranteed. Fees, charges, terms and conditions apply. Rapid Loans Pty Ltd holds Australian Credit Licence Number 388847.