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Debt Consolidation Loans – A Tactic During a Downturn
Should you get a debt consolidation loan during a downturn like Covid-19?
During a downturn, one of the first things people start to look at is consolidating their finances to ease their financial burden and make things more manageable. We can find ourselves in situations where over time we take up various finance and repayment plans and it becomes hard to manage all the different amounts, interest rates and payment dates. When a recession or economic downturn hits and times become tough, getting a debt consolidation loan can help people save money and manage their finances easier.
Debt consolidation loans combine all your loans into one, easier to manage loan, so you pay fewer loan management fees and interest rates. During a downturn, this is particularly useful for people looking to get themselves out of debt faster and manage their debt better and with more confidence. For example, you may owe $3,000 on a store card, $2,000 on a credit card and have a $5,000 personal loan – all at different interest rates, and you’re struggling to juggle all the repayments. Instead, you may look at getting a debt consolidation loan for $10,000 with a fixed rate of 8% p.a. to pay off your other loans. With only one repayment to worry about, and a lower interest rate, you may be surprised how much money and time you could save.
The Keys to Making Consolidation Loans Work
The key to making debt consolidations work is by taking the loan over the shortest possible time period, and by getting a lower overall interest rate than the loans you are consolidating. This means you can get out of debt faster and pay less interest in the long-run, thus freeing up more cash. There has been a lowering of interest rates around the country because of the downturn, so it’s a good time to consider consolidating your higher interest rate loans into one, lower interest loan so your payments are less during this difficult time.
We also advise people to do the following to ensure their debt consolidation loans work for them:
- Try not to take on additional debt during a downturn and be disciplined with your spending during this time.
- Check the cancellation and early repayment fees on your existing debts before you go ahead with consolidation to ensure you’re not paying more in fees.
- Take time to work out what is a comfortable repayment term so you don’t risk paying further interest or late fees in the long-run.
- As with your repayment term, work out a repayment schedule that is manageable for you to make repayments on time while also being able to make your day-to-day payments like living expenses as you bring down your debt.
If you would like to talk to us about consolidating your debt, please get in touch with our friendly team to see how we can help. You can also apply for a debt consolidation online. We make it easy for you to borrow and look beyond a bad credit rating. We offer very competitive loan rates compared to other lenders and instant approval is the goal and standard we always strive to achieve.
by Ash Horton
June 24, 2020