"I have too many different debt payments. How can I consolidate them to make things easier?"
We’ve had quite a few people write to us with questions about debt consolidation, so we’ve decided to do a bit of research and share our findings with you.
Basically debt consolidation means merging multiple loans into one loan. So if you have a couple of maxed out credit cards, maybe a short-term loan and a personal loan then you can benefit from joining them into one long-term loan.
The benefits of doing this are; you only have to deal with one lender instead of four, you usually get a lower interest rate on long-term loans and you probably end up having lower monthly repayments.
Here’s a quick example
Say you have two credit cards with an outstanding balance totalling $5.000, a short-term loan of $1.000 and a personal loan of $4.000. That makes a total of $10.000 and your repayments are a total of $400 a month on all debts.
By consolidating these loans into one long-term unsecured loan, you can lower the repayments to less than $200 a month and even lower if you can provide security in your property.
Start living again...
With lower monthly repayments you can start living within your budget again and you can stop the debt spiral from getting any worse. Of course it’s essential that you close your credit cards after you pay them out with the new long-term loan. Otherwise it’s too tempting to go on a shopping spree again... and you can always get a new credit card once you’ve paid out the long-term loan.
Debt agreements
If you are in a situation which is so serious that you can’t see a way out, then a debt agreement might be the solution you are looking for. A debt agreement is normally negotiated through an administrator and is a formal agreement with your creditors. The administrator can often negotiate a reduction of the debt amount and he ensures that the agreement is in line with the regulations set out by the Commonwealth Government legislation.
The most important thing about debt consolidation is that it provides you with a plan to get out of debt and it gives you room to breathe. Having multiple lenders, that constantly demand your attention and your money is very stressful and some people end up sick from worrying.
That is why it is really important that you don’t add any further debts once you’ve entered your debt agreement. A good way to help yourself stay out of debt is to create a budget for your weekly or fortnightly income and expenses.
Sure, it’s a less spontaneous way of living but it might end up being the biggest favour you’ve ever done yourself. You can learn about budgeting here. You can also see a great budget template that you can even print off and use to create your own budget here.
Debt can be like a black cloud covering the sun, so taking these steps to move it out of the way are essential to not only your financial wellbeing, but to your stress levels as well. So take action now and before you know it you’ll be back to normal, living your life the way you want to.
Helpful links - Debt Consolidation Companies:
Foxsymes (will also help non-property owners)
Credit Repair Australia (will also help non-property owners)
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