How to Use a Debt Consolidation Loan to Your Advantage in 2022
Are you looking to simplify your life in 2022? Aren’t we all!
If you still have multiple personal debts from 2021, such as a high credit card balance, a lingering personal loan, or a large car loan, debt consolidation could be to your advantage this year.
Not only can debt consolidation loans make paying off your multiple debts much more manageable, they can also save you money!
So if you’re tired of your current repayment situation, discover the benefits of consolidating your debts in 2022…
Pay in one regular payment
Tired of wasting time and energy managing your many repayment plans? One of the main advantages of consolidating your multiple personal debts into one debt consolidation loan is that you only have to worry about one regular payment, rather than managing and tracking a few.
This way, you can align your loan repayment with when you get paid: weekly, fortnightly, or monthly (depending on the schedule offered by the lender). Similarly, in some cases you may be able to set up automatic payment whereby on a selected day of each week, fortnight or month your refund is automatically issued from your bank account… just set and d ‘forget. Talk about minimal effort!
Pay less interest
Another benefit of a debt consolidation loan is that you can actually save on interest by combining your debts. Generally speaking, when you take out this type of loan, the interest rate is lower than at least one of your types of debt (such as a credit card which may have a higher rate than a personal or car loan).
Take this example:
Mario has a car loan of $20,000 at an interest rate of 9%, credit card debt of $5,000 at an interest rate of 22% and store card debt of $2,000 at an interest rate of 18%. If he were to keep his repayments separate, he would pay a combined amount of $899 per month. Over three years, it would end up costing him a total of $5,373 in interest.
On the other hand, if Mario took out a debt consolidation loan of $27,000 (his combined debts) with an interest rate of 8.00%, his monthly repayment would drop to $846. This means that Mario would pay $3,459 in interest over the same three-year period and end up save $1,914 in interest payments.
Pay less fees
Fees are no fun. But the good news is that debt consolidation can help you dodge them.
When you have multiple personal debts, chances are you’ll have to pay a range of fees for each product. For example, you may incur annual fees on your credit card, monthly custodial fees on your loan, or even additional fees to make additional repayments.
So when it comes to your debt consolidation loan, take the opportunity to say goodbye to as many fees as possible and reduce what you pay on the loan itself. That’s not to say you won’t pay any fees, but keep an eye out for costs such as initial setup fees, ongoing service fees, and prepayment fees. The less you pay, the better.
Pay off your debt sooner
If your multiple debts feel like an endless cycle of repayments, a debt consolidation loan can help you pay off what you owe sooner.
As mentioned, with this type of loan, you could save on the amount of interest you pay. This means that by paying less interest, you can free up more money to pay off your loan amount.
On that note, an important feature to look for when choosing a debt consolidation loan is the ability to make additional free repayments. This allows you to make additional contributions to your debt on top of your regular repayments. Also, try to choose a loan that does not impose a prepayment penalty when you repay your loan in full in advance. This way, once your debt is paid, you just leave (at no additional cost to you).
If you’re looking for other ways to wipe out your debt, check out these top 6 tips for giving up debt in 2022. Or if you want to start comparing debt consolidation loans now, take a look at the options below or visit our personal loan center to find out more!
* DISCLAIMER: The comparison rate combines the lender’s interest rate, fees and charges into one rate to show the true cost of a personal loan. The comparison rates shown are calculated on the basis of a loan of $30,000 with a term of 5 years or a loan of $10,000 with a term of 3 years as indicated, on the basis of monthly principal and interest repayments, on a secured basis for secured and unsecured loans. basis for unsecured loans. This comparison rate applies only to the example or examples given. Different amounts and durations will result in different comparison rates. Costs such as withdrawal fees or prepayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may affect the cost of the loan.
^ See Mozo Experts Choice Personal Loan Awards information
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