What is a debt consolidation loan?

A debt consolidation loan is a type of personal loan that lets you merge all your debt into a single loan. You can use debt consolidation loans for different types of debt (e.g., credit cards, car loans, personal loans, etc) and for loans from different lenders.

With a debt consolidation loan, you’ll only have to make a single payment every fortnight, week, or month instead of multiple ones. Debt consolidation loans can make it easier to manage your debt and help make repayments more convenient.

Can I consolidate credit card debt?

Yes, you can consolidate credit card debt, as well as other types of debt. For instance, if you have an outstanding debt with multiple credit card providers and a car loan, you can use a debt consolidation loan to merge all that debt into one loan. The funds from a debt consolidation loan will be used to pay off existing debt immediately.

Pros and cons of consolidating your debt with a personal loan

Before taking out a debt consolidation loan, it’s best to weigh the benefits and potential drawbacks. Understand the pros and cons of debt consolidation loans to help you decide the best course of action.

Pros of debt consolidation loans

  • It simplifies payment. Keeping track of debt and bills can be stressful especially when there are a lot of them. It’s easy to miss a payment and incur late fees. With a debt consolidation loan, you only have one recurring loan repayment.
  • It could reduce total debt payments. A good debt consolidation loan with low interest rates could save you a lot in the long run. Instead of paying multiple interest rates on multiple loans, you’ll only have to pay one.
  • It helps you manage your debt and finances better. You could have better control over your cash flow and overall finances because you don’t have multiple debts anymore. This will also make managing monthly costs easier and more convenient.
  • It gives you a better timeline for when you’ll be debt-free. When you’re juggling multiple loans, you won’t have a clear picture of when you can pay them all off. Consolidating your debt means after the loan term you’ll have paid off all or most of your debt.

Cons of debt consolidation loans

  • There could be upfront costs. When taking out a new loan, you may have to pay for upfront costs such as annual fees, admin fees, and the like.
  • There could be break costs for existing loans. If you decide to exit any existing loan before the end of the loan term, you may have to pay additional termination fees.
  • Missing payments may set you back further. Since all your debt will be in one loan, missing a repayment can cost you a lot more.

Can I get a debt consolidation loan with bad credit?

There are debt consolidation loans out there specifically for borrowers with bad credit scores. Discuss your options with a lending specialist or broker to see which bad credit debt consolidation loan fits your situation. Check the interest rates and comparison rates carefully when looking for debt consolidation loans.

How do I find the best consolidation loan?

Shopping around is a great way to find the best consolidation loan for you. Compare interest rates, read the loan terms and policies, and talk to different lenders to see what they have to offer. For an easier solution, you can always get the assistance of a broker like CarLoans.com.au.

At CarLoans.com.au., we help borrowers find a loan that suits their needs perfectly. From application to settlement, we’ll help you every step of the way. All you have to do is get in touch with us by calling 1300 889 669 or applying online, and we’ll search for your perfect loan. We work with trusted Australian lenders to ensure you get the best deal possible!

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