If you are thinking about taking out a loan to cover your other debt, you will definitely want to take note of the following five useful debt consolidation tips.
They could help you to make the best possible choice of loan and secure your financial peace of mind for a long time to come.
What is debt consolidation?
Debt consolidation is the process of taking out one loan to cover several other debts and pay them off completely.
There are three major reasons that people want to do this:
- To get a lower interest rate on their loans and therefore save themselves money in the long run
- To get a fixed interest rate on their debt to avoid the uncertainty of not knowing when an interest rate is going to spike
- For the convenience of only having loan to deal with and repay every month
Why do people get debt consolidation?
Often people take on more debt than they can actually handle. They may have opened several store accounts where they owe money, they may have contracts for cell phones, internet and the like and they may have larger loans for car finance or home loans.
These loans can add up and snowball into some really huge and frightening debt.
An individual who finds themselves in this situation will probably be overwhelmed by the amount of their debt, not necessarily in what they owe, but in how many different debts they have and in keeping track of the different interest rates, the different terms and conditions and the different amounts owed.
A person in this situation could easily find themselves in trouble with debt.
Should an interest rate spike, they might be unable to afford their monthly loan repayments and may have legal action taken against them.
These people will often apply for debt consolidation in the form of one large loan that will pay off all of their other debt.
The lower or fixed interest rate will help them to save money and the convenience of just one loan to pay off will put them at ease and will make for a more hassle free situation.
Where can you get debt consolidation?
There are a large number of companies and financial service providers who offer debt consolidation to individuals who require it. You can try your financial service provider or one of the following for a debt consolidation loan.
- First National Bank
- Standard Bank
- Capitec Bank
- Direct Axis
- Call Direct
- Zero Debt
Five useful debt consolidation tips
Always get rid of the debt with the highest interest rate first. This will help you to save money quicker as you will not have to fork out way more than you borrowed every month.
Spend only what you have to for a while. Try to avoid impulse buys and spending on things that you don’t really need as this is what probably got you into difficulty with debt in the first place.
Get advice from a debt counsellor in order to ensure that you are making the best possible choice when it comes to your debt consolidation.
A good, experienced debt counsellor from a reputable company will be able to give you the best advice, guidance and help and reassure you that you are making the right decisions.
Try to find a way to make some extra money. If you can supplement your income with a side job of some sort, you will be able to put more into your debt and get rid of it quicker.
Shop around for debt consolidation loans so that you are sure that you are getting a loan with the lowest possible interest rate and that the terms and conditions suit you and your situation.