Its a bit of a worry having to carry your debts into the new year, right? Have you ever thought of consolidating all your debt? If that’s a new word to you, keep reading for more.
Debt consolidation includes taking out a single new loan (at the lowest possible interest rate) to pay off all your other multiple smaller debts. Rather than having numerous debt repayments at higher interest rates, you consolidate all of these smaller loans into one loan with the lowest interest. Banks such as First National Bank and Nedbank offer you 48 months within which to pay personal loans, at an interest rate of between 24% to 27%.
When you have multiple outstanding balances of several credit cards and accounts, paying them off can be a long stretch and feels like it’s crippling your pockets in the long run. It is quite challenging to make progress when you are paying off five to seven different accounts at a time.
Paying off one personal account is much easier and will help you focus on one debt in the long run. Debt consolidation is a financial strategy offered by most banks; however, it is also essential to seek out a low-interest rate loan. By that, I mean the bank which charges the lowest interest rate over a long period. So do the work and sit down with consultants from various banks to compare their interest rates.
Debt consolidation is especially useful if you have high-interest debt, such as clothing accounts and credit cards. Many people aren’t able to stick to a monthly budget and succeed in paying their monthly debts. If you are one of those people, debt consolidation may be a viable option for you.
Here are things to consider before taking up a personal loan for a bank or financial institution.
The debt consolidation industry is full of scammers. It’s easy to run into a financial company that may advise a high-interest rate loan that costs more in the long run than paying your debts off on your own, so it’s crucial to evaluate debt consolidation institutions and the products they offer carefully.
Look for alternatives
If the bank can allow you to pay off your debt sooner and save money on interest in the process, take it. You will be able to pay off the debt within a year.
Consider paying the debt on your own
You can always try to pay off the small debts on your own, and this will require evaluating your income and creating a plan to pay the debts one account at a time.
Consider using the Consumer Credit Counseling Service (CCCS)
Credit counselling can help negotiate a debt repayment plan with your creditors that reduces your interest rate. However, you will have to make one monthly payment to the credit agency, and they pay the debt on your behalf.
With all these options available, it may be a good idea to consider debt consolidation as a method to pay off all your debts. You’ll be able to focus on one debt at a more affordable interest rate, instead of having to pay off multiple debts with high-interest rates.