Should I Consolidate My Debt?
Funding Options managing director Dom Cassisi writes about how debt consolidation could simplify your finances. But is it right for you?
Debt can be a tricky thing. Particularly so when you’re juggling debt from different quarters: car payments, education loans, home loans, multiple credit cards and more.
Debt consolidation could be your key to getting all of your debt organised and paid off in a timely fashion and getting it off of your mind.
What is debt consolidation and why do it?
Each debt you have probably comes with its own interest rate and fees. It can be hard to keep track of when each payment is due if you have several to manage.
Consolidating all of your debt into one payment frees you up to worry about only one interest rate and one due date.
Debt consolidation can even reduce your fees overall. The ultimate goal is to simplify the way you pay back debt and allow you to pay it off faster.
How to consolidate your debt
Get started by working out how much you owe right now and your fees and interest rates. Also calculate how much your present income is and how what you can afford in the way of payments.
Banks and other financial institutions offer a variety of methods for simplifying your debt such as:
– A single loan
– A low-rate credit card
– A home loan top-up
A loan is the most structured and reliable way to just eliminate your debt within a set amount of time. A credit card, however, is great for consolidating debt from multiple other credit cards. The home loan option may end up lowering how much you need to pay back on all of your debts, but you’ll likely have to pay more interest with this option than the others.
Weigh up the cost
Debt consolidation sounds like a great idea in theory, but taking a good look at the numbers could prove that it’s not right for you.
Consolidating debt may require that you pay some early payout fees connected to certain loans. It could very well wind up costing you more to refinance than to simply continue with your current repayment plan.
The important thing is to make sure you know where you’re at with your debt. Is it worth it to you to pay a little extra just so that you can simplify payments?
If so, there’s nothing wrong with that. Just plan ahead carefully to make the smartest decision for your situation.
Take a day to sit down in a relaxed setting with a calculator and copies of your latest records and bills. Make notes of what you presently owe and your current plan for repaying debt. This will give you an idea of which debt consolidation plan to begin exploring.
If you need a little help in crunching the numbers, then contact us to get some expert advice.
– Dom Cassisi, Managing Director