3 Criteria when you are considering a Loan for Debt Consolidation

con·sol·i·date

/kənˈsäləˌdāt/

verb

1.         make (something) physically stronger or more solid.
2.         combine (a number of things) into a single more effective or coherent state.

                Synonyms: merge, unite, combine, integrate, fuse, unify, amalgamate   

Are you wondering about the possibility of applying for debt consolidation?

Read on for a short recap and some key aspects to ensure that you are making the right decision before you continue with the application!

Simply put, taking out a debt consolidation loan involves combining several unsecured debts into a single loan that provides more favourable terms for the borrower. This means taking out a new loan to pay off a number of other debts usually resulting in a lower interest rate, and consequently, a lower total monthly repayment.

With a debt consolidation loan, you simply add together all the outstanding amounts you owe to various lenders and move the total amount to one debt consolidation lender. You will thus have one monthly instalment with one interest rate, and instead of paying countless individual lenders, you’ll only have to manage one loan. This makes your repayments easier to manage - BUT, always remember that it does not make them vanish into thin air.

A consolidation loan doesn’t work its magic like Houdini, it simply lifts the burden of debt just enough for you to have some breathing space. You still have a big commitment to honour!

A Debt Consolidation Loan may be a good idea – but, it can only be super beneficial to you if it meets the following 3 criteria:

1. Will it enable you to settle all your debts?
2. Will it reduce the total current interest rates you are being charged?
3. Will it reduce your total current monthly payments? 

If you can answer these questions honestly and the loan you are looking at answers positive on these 3 criteria, you can consider going forward with the application. You will have more time to manage your finances whilst enjoying a lower interest rate, settle your debt in a cost-effective way, and the advice of a financial consultant. We hope this helps! Feel free to make use of the Fincheck Loan Comparison page to compare consolidation loans. Here’s to the health of your financial future!