What is debt consolidation?
Debt consolidation is the process of repaying multiple debts at a lower interest rate by combining them. This can assist you in lowering your monthly payment commitment and better managing your cash flow.
It can be stressful to have various financing balances that must be paid off at different times, for different amounts, and to different parties. Debt consolidation means that you only need one loan to pay off all of your debts once and for all.
Consolidating debt also entails restructuring it to make it more affordable for you at your current income level. That way, you can concentrate your income and resources on one debt rather than multiple ones, gradually paying them off.
Why should I seek debt consolidation?
Debt consolidation can provide a range of benefits, including faster, more streamlined payoff and lower interest payments.
Here are some of the advantages of debt consolidation:
1. Streamlines finances
Combining multiple outstanding debts into a single one reduces the number of payments and interest rates you must keep track of. Consolidation may also help improve your credit health and score by lowering your chances of missing payments or making a late payment.
2. It may assist you in paying off debt faster
If your debt consolidation is paying less interest than individual debts, consider making extra payments with the money you save each month. This can help you pay off your debt faster, saving you even more money in interest over time.
3. Reduced interest rate
If your credit score has improved since applying for other types of financing, consolidating these debts may allow you to lower your overall interest rate, even if you have mostly low-interest loans. This can save you money over the loan’s life, especially if you don’t consolidate with a long loan term.
4. Confirmed reduced monthly repayment amount
When you consolidate debt, your overall monthly payment will be lower because your upcoming payments will be spread out over a new (and possibly extended) term.
5. The possibility of a higher credit score
Because of the hard credit inquiry, applying for a new loan may temporarily lower your credit score. However, debt consolidation can help you improve your credit score in a variety of ways.
Paying off revolving lines of credit, such as credit cards can lower the credit utilisation rate reflected in your credit report.
Can SBH help me if I have been referred to AKPK?
When you consolidate debt, your overall monthly payment will be lower because your upcoming payments will be spread out over a new (and possibly extended) term.