Debt Consolidation

Debt consolidation involves taking one new loan to pay off several unsecured debts. For instance, credit cards and personal loans are paid and combined into a single new affordable payment. Depending on your risk profile, the new loan may result on a lower rate of interest.  On the other hand, debt consolidation results in reduced installment as well as improve your credit rating.

Benefits of a debt consolidation loan

Consolidation & Reduced Interest

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

Consolidation & Faster Payment

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

Consolidation Loan & Huge Savings

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

Debt Consolidation & Creditor Management

Turns multiple payments into a single payment. As a result, it eliminates the stress of multiple DebiChecks.

Consolidation loan & Budget Control

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

Consolidation Loan & a Healthy Credit Score

It helps improve the consumers’ credit rating. Because of this, it becomes easier to access new lines of credit.

The financial risks of a debt 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. Hence, debt collectors will make harassing calls.

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 debt consolidation loan?

Contrary to the general perception, not all consumers can qualify for debt consolidation. As a result, only those who would have demonstrated that they have enough affordability and disposable income qualifies. In addition to that, the consumer should have the minimum required credit score. A credit score can be viewed on a credit report which is kept by credit bureaus.

For more information on how debt consolidation loan can help you. Contact DebtMap today for a free discussion with one of our Financial Consultants.

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