Debt Consolidation

Debt consolidation involves taking one new loan so as to pay off several unsecured debts such as credit cards,personal loans into a single new loan that is more favourable and affordable. Depending on the consumers’ risk profile, the new loan may result in a lower rate of interest, a reduced installment or a combination of both.

Benefits of a consolidation loan

Reduced Interest

Tend to reduce the rate of interest, thereby saving clients on interest payment.

Faster Payment

This is mostly the case with credit cards that have no repayment term.

Huge Savings

Pay one consolidated,reduced instalment & cut on interest payments.

Creditor Management

Turns multiple payments into a single payment.

Budget Control

Management of expenses is much easier because there is one loan to manage.

Healthy Credit Score

It helps improve the consumers’ credit rating.

The financial risks of a consolidation loan

Short Term Fix

It can be a temporary solution when a consumer cannot repay the new loan.

Extra Fees and Charges

There may be hidden fees for alteration, late payments and payment default

High Interest rates

Interest may be very high depending on consumers’ risk profile.

No Legal Protection

There is no legal protection should a consumer fail to repay a consolidation loan.

Long-run effect

Lower repayments over a longer term may add to the overall cost of the debt because the consumer will be paying interest over an extended period.

Who can apply for a consolidation loan?

Any consumers who would have demonstrated that they have enough affordability basing on available disposable income, in addition to that the consumer should have the minimum required credit score.

For more information on how debt consolidation may help you, contact DebtMap today for a free discussion with one of our financial consultants.

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