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.
Tend to reduce the rate of interest, thereby saving clients on interest payment.
This is mostly the case with credit cards that have no repayment term.
Pay one consolidated,reduced instalment & cut on interest payments.
Turns multiple payments into a single payment.
Management of expenses is much easier because there is one loan to manage.
It helps improve the consumers’ credit rating.
It can be a temporary solution when a consumer cannot repay the new loan.
There may be hidden fees for alteration, late payments and payment default
Interest may be very high depending on consumers’ risk profile.
There is no legal protection should a consumer fail to repay a consolidation loan.
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.
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.