Did you know that the average Australian has over $20,000 in personal debt? A recent study shows that Aussie borrowers average almost $7,000 in personal loans, over $11,000 in car loans and almost $2,000 in credit card debt. That’s a lot of different monthly repayments to be managing! Fortunately, there is some good news: debt consolidation could help you get things under control and your debt paid off faster.
But what are debt consolidation loans? Should you try to consolidate debt? And how can you make sure your debt consolidation loan will be beneficial (both in the short and long term)?
What are Debt Consolidation Loans?
It’s a type of finance product designed to merge different kinds of unsecured or high-interest debts into a single, more manageable loan. For example, you might currently be juggling repayments on two different high-interest credit cards, a personal loan and a car loan that you obtained through dealership finance. As a result, you may be finding:
- You’re paying a crippling amount of interest each month.
- You don’t seem to be getting any closer to reducing your overall debt.
- Your potential borrowing power for a home loan or a new car loan is significantly reduced.
When you consolidate debt, you combine all of these different forms of debt into a single loan with a competitive interest rate.
What are the Benefits When You Consolidate Debt?
So, the big question is, should you consider consolidating your debt? This could be a good move for you if:
You Want to Apply for a Home Loan or a New Car Loan
Many people consolidate unsecured loans before applying for a home loan or new car loan to increase their maximum borrowing capacity for their new loan.
Your Current Car Loan Has a High Interest Rate
If you financed your current car loan through dealership finance then you may be paying more interest than you should be. Refinancing to a car loan with a more competitive interest rate could save you a significant amount of money (in both the short and long term).
You’re Struggling to Manage Your Current Repayments
If you’re struggling to pay more than just the monthly minimum on high-interest credit cards, then consolidating that debt to a single low-interest loan could make life a lot easier. This could enable you to actually start paying off the debt.
You’re Committed to Reducing Your Personal Debt
Consolidating debt can be a fantastic way to deal with high levels of personal debt…but only if you’re committed to taking on less debt in the future. Otherwise, you run the risk of quickly taking on even more debt (e.g., maxing out the credit cards again) while you’re still making repayments on your new loan.
Contact Muscle Money About Debt Consolidation
If you’re considering consolidating your debts, the team of expert brokers at Muscle Money can help. We can assist you with refinancing a car loan to a deal with a better rate, as well as consolidating multiple unsecured loans into a single product with a more manageable monthly repayment.
Contact us today to learn more about how to consolidate debt and regain control of your finances.
Caleb Waye-Harris, Senior Manager of Asset Finance at Muscle Money, has almost 15 years of relevant experience in the finance industry. His extensive background includes project management, consumer and commercial lending and asset-based lending.
